Fitch lowers Qwest two notches

Fitch Ratings has sent the debt of Qwest Communications to its lowest level ever, dropping the carrier’s rating two notches to CCC+ from B. Qwest’s rating outlook remains negative.

Fitch lowered the ratings because of its “growing concern” that Qwest’s sale of its directory business will not generate enough cash to offset the EBITDA and free cash flow the company will lose when the unit is sold off.

In addition, the timing and value of the sale could be negatively impacted by the SEC investigation into Qwest’s accounting and the company’s own internal audit, which Qwest has said will force it to restate earnings by $1.1 billion, Fitch said. The company’s liquidity troubles, lack of financial flexibility and potential bank covenant violations also contributed to the downgrade.

The move by Fitch is not expected to have any impact on Qwest’s operations, while a Qwest spokesman said the action by Fitch is not a reflection of any new developments.

“We know of nothing new that would cause Fitch to make this adjustment,” he said. “The information cited in their announcement has been disclosed or discussed previously.”