Debt Downgrade Further Clouds Qwest's Outlook
By Scott Moritz
03/05/2002 15:51
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Qwest Q got another credit downgrade Tuesday, leaving its mountainous debt one notch from junk status and further complicating the Denver phone giant's financial picture.
News of the downgrade Tuesday afternoon immediately sent the stock plunging 5%, though Qwest shares traded above those levels later in the session. The stock, off 22 cents at $8.93 Tuesday afternoon, has lost more than three-quarters of its value in the last year.
Moody's Tuesday cut ratings affecting $28 billion of Qwest debt, citing concerns that the company wouldn't be able to "resolve substantial near-term debt maturities." Moody's also said it would leave its newly lowered ratings on review for an additional downgrade, which could further squeeze Qwest's cash position.
The debt downgrade comes as little surprise, considering that Qwest's liquidity worries have essentially shut it out of the commercial paper market, where corporations usually turn to find cheap short-term cash.
Qwest had said Friday, in a weekly update with investors, that it was still negotiating the terms of the $4 billion loan it drew down from its bankers last month and that it couldn't rule out violating debt covenants. In addition to seeking a waiver for its $4 billion credit line, Qwest also has $850 million of long-term debt maturing in July.
Qwest has long faced mounting losses on its next-generation long-distance broadband operations. But recently the squeeze on the company's finances has only tightened as a result of a loss from its relatively healthy local phone business. In an attempt to overcome these losses and service its massive debt load, Qwest says it is hoping to sell assets including its phone book unit, its wireless business and even some local phone operations.
But it's clear that from the credit agencies' perspective, Qwest hasn't demonstrated it can move fast enough to stanch the red ink. |
