Moody’s cuts Sprint debt rating

Just two days after downgrading Qwest Communications long-term debt to one notch above junk status, Moody’s Investors Service lowered the rating on Sprint’s long-term debt to two spots above junk. The company’s debt, which now stands at Baa2, remains on watch for further downgrades.

According to Moody’s the downgrade was made because of performance pressure in Sprint’s long-distance business. In addition, the ratings agency said Sprint PCS will face increasing competitive pressure during the course of the year that could slow the unit’s growth and capital investments have increased Sprint’s debt without generating free cash flow.

To alleviate the situation, Moody’s said Sprint must refinance its current maturities, maintain its reduced capex budget without hurting growth and possibly sell its directory business as a means of reducing debt.

--Toby Weber, staff writer