Qwest CEO "confident" on bank accord
Chief Executive Joe Nacchio, in New York for a yearly meeting with credit-rating agencies, says he's confident that the company will reach an agreement with lenders.
"I am confident on reaching an agreement that will satisfy both the banks' needs and our needs in a relatively short time," said Qwest CEO Joe Nacchio, who was in New York on Friday for a yearly meeting with credit-rating agencies.
The telecom carrier sparked concern among investors on Feb. 14 when it announced it would draw down a $4 billion short-term line of credit to pay off its $3.2 billion commercial paper debt. The action pounded Qwest's stock and prompted Standard and Poor's and Moody's Investors Service to downgrade the carrier's credit rating.
Telecom finances have been in the spotlight over the past few weeks as communications companies McLeodUSA, Network Plus and Global Crossing filed for bankruptcy. Global Crossing has also been under scrutiny since a former employee made allegations that the company's accounting practices had artificially boosted revenue.
"The biggest things we're concerned about are the company's short-term financial issues," said Greg Zappin, a Standard & Poor's director. Zappin named two chief concerns: Qwest needs to renegotiate a new short-term credit line or extend the existing one with its lenders, and also pay for the roughly $1 billion in long-term debt that is due this year.
U.S. Piper Jaffray analyst Cary Robinson says he sees no accounting issues with Qwest so far and that the concern with the telecom industry comes in part from anxiety over how the slow economy mired the growth plans of the carriers.
"There were a lot of telecom companies that leveraged their debt to grow, and when the economy turned into a recession, the telecoms did not consider that," said Robinson. "No one foresaw the recession, so no one planned for it."
Qwest has taken steps recently to improve its finances and reduce its debt by between $1.5 billion and $2 billion. The company announced Feb. 5 that it would offer about $2.5 billion in debt and is considering the sale of non-core assets like its access lines, wireless holdings and its directory business to strengthen its finances.
Nacchio on Friday said the company aims to reduce its costs by $1.1 billion this year through previously announced staff reductions, improved earnings and more efficient operations.