360networks stock hits record low after downgrade
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By Ian Karleff
TORONTO, June 7 (Reuters) - Shares of 360networks
sank to a record low on Thursday after Moody's
Investors Service cut the fiber-optic network builders' debt
rating and questioned its ability to stay afloat without access
to new debt or equity financing.
Moody's said the company's debt rating, which at B3 was
already sitting six notches below investment grade, cannot go
much lower than the downwardly revised Caa3.
"A rating of Caa3 is a very low rating, we don't have much
below that," said John Page, a senior analyst at Moody's.
360networks scaled back capital capital spending plans in
mid-May by $1 billion and suspended the building of 360asia and
360pacific projects, saying it would meet demand in Asia in the
short term by reselling capacity rather than building.
When the company sold shares in an initial offering in
March 2000 it was planning to build a fiber-optic network
spanning the globe.
"Absent additional funding, the company's liquidity
position may be insufficient to provide sustained support for
its operations," wrote Page in a downgrade notice.
Page said debt investors are worried about the company's
asset quality, and three significant cuts to cash revenue
targets for the year. Targets now sit at $1.2 billion to $1.4
billion, down from original guidance of $3.1-$3.3 billion.
360networks has said it needs an additional $300 million
this year to fund its operations, a sum which Page estimates
will be hard to raise considering the negative investor
sentiment surrounding the company and the industry.
A spokeswoman for 360networks told Reuters on Thursday that
as of today there is "no news" in regards to closing the
previously stated funding gap.
Shares of 360networks sank 20 Canadian cents to C$1.52 on
the Toronto Stock Exchange on Thursday, and down 12 percent or
15 cents to 99 cents on Nasdaq.
360networks' shares have plunged from a September high of
C$35.90 as investors question the firm's ability to meet its
obligations on $2.5 billion of debt, as new funds dry up in the
sector.
"To improve the rating we would want to see the funding gap
dealt with and to see another quarter of execution. We would be
concerned if we saw future revisions to revenue and adjusted
EBITDA," added Page.
Analysts said 360networks competitors, including Level 3
Communications and Williams Communications
Group, stand to benefit from 360networks' scaled-back building
plans.
Kaufman Bros L.P. issued a research note earlier this week
saying revenues will flow back in coming months to well-funded
telecom carriers who are able to weather the "capital storm".
Moody's Page said demand for data-bandwith on fiber-optic
networks is expected to grow exponentially, although customers
will likely meet their needs using one supplier.
Those who come late to the game by not having a global
network are likely to enter a downward spiral of not being able
to fund network expansion through revenues.
REUTERS
Rtr 18:06 06-07-01 |
