Janus is close to facing an unprecedented problem for a fund firm -- its debt rating is closing in on junk status. Tuesday Standard & Poor's downgraded the Denver-based fund firm's long-term debt rating to BBB+, the lowest non-junk rating on its scale. S&P also changed its outlook to "stable" from "negative."

The downgrade is a response to the erosion of the firm's asset base following the collapse of the Nasdaq from 2000 to 2002 and the firm's involvement with market-timers.

The S&P analysts also pointed out some "erosion" in the value of the firm's franchise.

However, the report also noted that Janus could stabilize its position if its "fund flows turn positive and financial measures improve."

Janus has cut its outstanding debt to $376.9 million from $851 million during the past two years. Much of that debt had been taken on to provide cash to buyout founder Thomas Bailey in 2001.

Janus is one of the few pure fund firms to rely so heavily on public debt for financing. 

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