Moody’s Cuts Qwest’s Rating
Rating company Moody’s Investors Service cut Qwest Communications International Inc. to one notch above “junk” status even as Qwest said that it was on track to meet its financial forecasts and that demand from business customers might be firming.
Moody’s cut its long-term rating on Qwest and its units and warned it might downgrade the Denver voice and data services company further if it was unable to renegotiate its $4-billion credit pact and raise funds to pay off its nearly $25-billion debt load.
“The warning is not to be taken lightly,” said Wayne Schmidt, who helps invest $1 billion for Advantus Capital Management in St. Paul, Minn.
Qwest, the dominant local phone company in 14 states from Minnesota to Washington, has been in talks with its lenders about an extension or relief of the cash-flow requirements in its lending agreement, Moody’s said. Qwest President Afshin Mohebbi reiterated Tuesday that the company expected to be fully funded through early next year.
Qwest also is weighing the sale of certain assets to raise cash.
“The downgrades reflect concerns about Qwest’s ability to resolve substantial near-term debt maturities, including the need to negotiate a covenant waiver under its $4-billion bank facility and repay $850 million of maturing long-term debt in July,” Moody’s said.
Speaking at a Credit Suisse First Boston investor conference in Orlando on Tuesday, Mohebbi said the company was on track to be cash-flow positive in the second quarter and to post $19.4 billion in sales for 2002.
“We’re seeing some rays of hope in terms of enterprise demand, which is very important, coming back,” Mohebbi, who also is chief operating officer, said at the CSFB Telecoms conference.
Fund managers attending the conference said they weren’t sure what to believe.
“You have to believe this management team is made up of fools, or you have to believe fear has taken hold of the marketplace and people have extrapolated Enron into everything,” said one fund manager, who declined to be named.
