Level 3’s bond ratings are cut

Ratings on some bonds for telephone network operator Level 3 Communications Inc. were cut to “default” by Standard & Poor’s as the money-losing company struggles to generate enough cash to pay debts.

The corporate credit rating for the company was reduced to “selective default” from “CC,” S&P; analyst Susan Madison said. S&P; also lowered its rating for Level 3’s convertible notes due in 2010 to “default.”

The company’s cash flow is dwindling as the recession prompts customers to put off phone-service expansions. Level 3 had $587 million on hand at the end of the third quarter and plans to use some of that cash to pay off its $344 million in debt due next year.

Calling the S&P; ratings only temporary, the Broomfield, Colo., company said: “Reinstatement of our overall credit rating is widely anticipated in the short term.”

Level 3 shares fell 3 cents to 65 cents.