S&P assigns, affirms Sprint Corp <FON.N> ratings
--From AOL. -- Cooters
NEW YORK, Jan 16 - Standard & Poor's today assigned its triple-'B'-plus rating to $2 billion senior unsecured intermediate notes, drawn down under a shelf registration, to be jointly issued by Sprint Corp. (Sprint) and its subsidiary Sprint Capital Corp. Sprint Capital Corp. is a funding conduit for Sprint's nonregulated activities. The notes are unconditionally guaranteed by Sprint.
At the same time, Standard & Poor's affirmed its outstanding ratings on Sprint, Sprint Capital Corp., and related entities (see list below).
The outlook is negative.
Proceeds of the notes will be used to refinance existing short-term indebtedness.
About $18 billion of consolidated debt was outstanding at Sept. 30, 2000.
The ratings on Sprint reflect the strength of its local telephone operations and expected cash flow improvement in its wireless telephone segment, somewhat offset by pricing pressures in the company's long-distance segment.
In November 2000 Sprint announced that it was accelerating both wireline and wireless data growth initiatives to offset pricing pressures in the long-distance voice segment. The increased capital requirements are expected to be financed with a mix of debt and equity.
Total cash requirements for 2001 are anticipated to total $5 billion, of which $3 billion will be funded with new personal communications services (PCS) equity.
New Internet-related initiatives in the FON Group, which will enable the company to leverage its Internet protocol (IP) network backbone, include Web hosting, managed network services and applications, global IP services, and expanded transport capabilities.
Sprint is also expanding its nationwide network to include local fiber rings in 20 major U.S. markets. These local rings will significantly reduce special access costs. Furthermore, Sprint plans to leverage its strong local customer base by selectively deploying broadband services.
The local customer base provides about $2.5 billion of annual EBITDA, which is about 50% of Sprint's total cash flow. Sprint has already been successful in offering long-distance voice services to its local customers on a bundled basis, enabling it offset some of the revenue decline in the long-distance segment.
The addition of broadband services to this bundle should increase the number of high-end users and result in higher cash flow margins.
In the PCS Group, Sprint plans to upgrade the 100% code division multiple access (CDMA) digital wireless network to third generation, which will result in doubled voice capacity nationwide and dramatically increase data speeds.
The deployment of new mobile data products should result in higher average revenue per unit, and could lead to lower churn. The PCS Group is expected to turn EBITDA positive in 2001.
Based on preliminary estimates of improved cash flow and the expectation that the PCS Group will issue new equity of about $3 billion in 2001, Standard & Poor's expects debt to EBITDA, which is currently in the 3.5 times (x) area, to decline to below 3.0x within two years.
OUTLOOK: NEGATIVE
If the company does not issue the expected $3 billion of new equity in 2001 to offset the expected $2 billion of new debt to fund 2001 capital requirements, it is likely that the ratings will be downgraded, standard & Poor's said.
RATING ASSIGNED
Sprint Corp./Sprint Capital Corp. RATING
2 billion senior unsecured notes
(Guaranteed by Sprint Corp.) BBB+
RATINGS AFFIRMED
RATING
Sprint Corp.
Corporate credit rating BBB+/A-2
Senior unsecured debt BBB+
Preferred stock BBB- Commercial paper A-2
Sprint Capital Corp.
Senior unsecured debt
(Guaranteed by Sprint Corp.) BBB+
Commercial paper
(Guaranteed by Sprint Corp.) A-2
Sprint Spectrum L.P.
Corporate credit rating BBB+
Senior unsecured debt BBB+
Centel Corp.
Corporate credit rating BBB+
Centel Capital Corp.
Senior unsecured debt
(Guaranteed by Centel Corp.) BBB+
Central Telephone Co.
Corporate credit rating BBB+
Senior secured debt A
United Telephone Co. of Ohio
Corporate credit rating BBB+
Senior secured debt A
Carolina Telephone & Telegraph Co.
Corporate credit rating BBB+
Senior unsecured debt BBB+
Sprint - Florida Inc.
Corporate credit rating BBB+
Senior secured debt A
17:22 01-16-01
Copyright 2001 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. All active hyperlinks have been inserted by AOL. |
