Qwest debt near junk status

Moody’s Investors Service has downgraded the long-term debt of Qwest Communications to one notch above junk status.

The move, from Baa2 to Baa3 reflects Moody’s concerns about Qwest’s ability to resolve near-term debt maturities, specifically the need to renegotiate covenants on its recently drawn-down $4 billion bank facility. In addition the company must repay $850 million of debt beginning in July. According to Moody’s Qwest needs to raise additional long-term financing within the next two months in order to meet these payments.

Qwest’s ratings remain under review for further downgrades. If the company is downgraded to junk status, future borrowings likely would be established at a significantly higher interest rate than the company currently pays.

--Toby Weber, staff writer