TEXT-S&P assigns 'BB' rating to CenturyLink notes
(The following statement was released by the rating agency)
Oct 1 - Standard & Poor's Ratings Services said today that it assigned its'BB' issue-level rating and '4' recovery rating to Monroe, La.-based incumbenttelephone company CenturyLink Inc.'s
proposed senior notes due 2023 and2043 (undetermined amount). The '4' recovery rating indicates expectations foraverage (30%-50%) recovery in the event of payment default.
The company intends to use the net proceeds to redeem $550 million aggregateamount of Qwest Communications International Inc.'s (QCII) senior notes due2015 and repurchase all $800 million of its senior notes due 2018. As a resultof this transaction, there will be no more remaining debt at QCII.
The 'BB' corporate credit rating on CenturyLink is unchanged and the outlookremain stable as the transaction is unlikely to have an impact on thecompany's credit measures, including leverage, which was about 3.3x on a proforma basis as of June 30, 2012.
The ratings on CenturyLink reflect a business risk profile assessment of"fair" and a financial risk assessment of "significant." Key business riskfactors include our expectation that revenues will continue to decline becauseof competition in its core consumer wireline phone business from cabletelephony and wireless substitution, which contributed to access-line lossesof about 6.1% during the second quarter of 2012, year over year, pro forma forthe Qwest acquisition although access-line trends have shown steadyimprovement since the acquisition closed. We also consider the company'sfinancial policy aggressive, with a substantial shareholder dividend payout,which limits debt reduction. Debt to EBITDA was about 3.3x as of June 30,2012, pro forma for acquisitions and including our adjustments for operatingleases and postretirement liabilities. We expect leverage to remain in thelow- to mid-3x area over the next few years.
Tempering factors in the business risk assessment include good scale and afavorable market position as the third-largest ILEC in the U.S.; solidoperating margins and free operating cash flow generation; and modest growthin high-speed data services, which helps mitigate revenue declines fromaccess-line losses. (For the complete corporate credit rating rationale, seethe full analysis on CenturyLink, published April 27, 2012, on RatingsDirect.)
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RATINGS LISTCenturyLink Inc.Corporate Credit Rating BB/Stable/--New RatingsCenturyLink Inc.
Proposed sr nts due 2023 and 2043 BB
Recovery Rating 4
Complete ratings information is available to subscribers of RatingsDirect onthe Global Credit Portal at
. All ratings affectedby this rating action can be found on Standard & Poor's public Web site at. Use the Ratings search box located in the leftcolumn.(New York Ratings Team)
((e-mail: pam.niimi@thomsonreuters.com; Reuters Messaging:pam.niimi.reuters.com@reuters.net; Tel:1-646-223-6330;))