Moody's may cut 17 telecoms, billions in debt
By Jonathan Stempel
NEW YORK, Oct 3 (Reuters) - Moody's Investors Service
warned on Wednesday it may downgrade at least 17 wireline
telecommunications companies, including several of the largest U.S. issuers of junk bonds, and worried that many would be unable to survive as the U.S. economy worsens.
The rating agency also revised its rating outlook for five other wireline telecoms companies to negative.
The bonds subject to downgrade include some of the
best-known, most widely-held junk bonds, such as those of Level 3 Communications Inc. <LVLT.O>, McLeodUSA Inc. <MCLD.O>, Williams Communications Group Inc. <WCG.N> and XO
Communications Inc. <XOXO.O>, most of which already carry low junk grades. Tens of billions of dollars of debt are involved.
"Today's action is prompted by Moody's concern that a
worsening economic environment is likely to place further
downward pressure on the constrained liquidity and fragile
business prospects of many emerging wireline telecom
operators," Moody's said.
The rating agency said its review will focus on the
telecoms' actual results for the quarter ending Sept. 30, and the ability of each company to fully fund its business plan.
"The likelihood of a more fundamental and protracted
business downturn will further stress the viability of these
already-revised business plans and test the survivability of
the dwindling number of players remaining in this troubled
sector that we believe remains effectively closed to the public debt and equity markets," it said.
Junk, or high-yield, bonds carry ratings of "Ba1" or lower from Moody's and "BB-plus" or lower from Standard & Poor's and Fitch because of their credit risks.
Many telecoms have suffered in 2001, and more than 20 have sought bankruptcy protection, because the shakeout in the technology sector crimped demand and forced many customers to disconnect services.
Many telecoms' debt loads far exceed their market
capitalizations, and their debt often trades at "distressed"
levels, below 50 cents on the dollar.
Moody's said it may downgrade ratings for Level 3,
McLeodUSA, Williams, XO, Allegiance Telecom Inc. <ALGX.O>, Asia Global Crossing Ltd. <AX.N>, Choice One Communications Inc. <CWON.O>, FairPoint Communications Inc., FLAG Limited and FLAG Telecom Holdings Ltd. <FLAG.O>, Focal Communications Corp. <FCOM.O>, GT Group Telecom Inc. <GTTLB.O>, Impsat Fiber Networks Inc., ITC DeltaCom Inc. <ITCD.O>, KMC Telecom Holdings Inc., Madison River Capital LLC, Pac-West Telecomm Inc. <PACW.O> and Primus Telecommunications Group Inc. <PRTL.O>.
The rating agency also said it revised its rating outlook to negative on ratings for Alaska Communications System Holdings Inc., Broadwing Inc. <BRW.N>, GCI Inc., Time Warner Telecom Inc. <TWTC.O> and Valor Telecommunications Inc. Focal, Level 3 and XO, among other telecoms, are already undertaking debt restructuring or reduction plans.
(( U.S. Financial Markets Desk, (646) 223-6317,
jon.stempel@reuters.com ))
REUTERS
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