Broadwing

(BRW)

plunged more than 40% this week as new concerns about revenue and cash flow quality combined with worries of debt burdens and funding weaknesses to drag the stock down. In its latest quarterly financial statement, the telecommunications company, formed by the union of local phone provider Cincinnati Bell and national fiber optic carrier IXC Communications, said it benefited from $32 million in nonrecurring capacity swap revenue via a bankrupt customer. This means recurring sales were weaker than originally presented in the company's earnings release last month, and it clouds the quality of revenue and cash flow. Broadwing says it accounted for these indefeasible rights of use according to

SEC

guidelines, but these capacity sales typically carry margins as high as 90%, which can goose earnings, eventually forcing the company to take on additional debt. Broadwing's creditors require that it not take on debt beyond 4.75 times cash flow, and many analysts fear the company is close to violating those guidelines by the end of the year.