S&P Cuts Qwest's Rating Again

Standard & Poor's again lowered its corporate credit rating on Qwest ( Q), pushing the company further into junk bond territory, and the agency expressed worries about the telco's ability to service its existing debt.

S&P cut its Qwest rating to single-B-minus, its sixth-highest junk grade, from single-B-plus. At the same time, the agency revised its rating outlook to negative from developing, citing the company's weakened operations. As of June 30, Qwest had about $26 billion of debt outstanding. S&P first placed a junk rating on Qwest in May.

Last week, Qwest set plans to sell its directories business for $7 billion. S&P called the agreement a "positive development," but said it still has "significant concern about future operating performance, as well as the potential for restructuring the public debt" of Qwest.

If Qwest is unable to obtain the amendments the company is seeking for its bank credit line before the end of September, S&P said it might further downgrade its debt. Ratings downgrades make borrowing more costly and can hurt companies in other ways too, sometimes pushing them out of compliance with debt covenants and scaring away investors who focus on blue-chip securities.

Shares of Qwest ended regular trading up 10 cents at $2.77. The stock was unchanged after the close on the Island platform.

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