Qwest to Pay Higher Interest Rate on Loan

Qwest Communications International Inc., seeking a $500-million loan to stave off a cash crunch, was forced by banks to accept an interest rate higher than that paid by some bankrupt companies.

The biggest local-telephone company in 14 Western U.S. states said it would pay 8.75 percentage points more than the prime lending rate, or 13.5%, on the loan. Bankrupt companies typically pay no more than 5 percentage points above benchmark rates for loans.

The high rate shows how desperate Qwest is for cash as it struggles to service $26.3 billion in debt after nine consecutive quarters of losses. Qwest, waiting for proceeds from the planned sale of its phone-book unit, is asking lenders to relax terms and give it more time to repay $3.39 billion in loans.

The Denver-based company wants its lenders to extend the maturity on loans and relax a covenant that requires the company’s debt to be less than 4.25 times earnings before interest, taxes, depreciation and amortization.

Shares rose 3 cents to $1.53 on the New York Stock Exchange.