Mar, 2002 : Qwest Tightening Budget to Avoid Financial Default
📅 - Qwest Communications International Inc., a Broadband Internet-based communications provider, today announced that it could be in default if it does not take action to reduce debt, but the company said it was in talks with lenders and was taking steps to avoid that happening.
Qwest said late last week it could be in default by the end of the second quarter, but it has been cutting costs, issuing equity-based securities and selling assets.
Under its existing $4 billion credit facility, Qwest would risk violating covenants if its debt was more than 3.75 times earnings before interest, taxes, depreciation and amortization at the end of any fiscal quarter.
Expecting to generate $300 million to $400 million in negative free cash flow for the first quarter of 2002, the company's outlook has improved. It had previously expected a negative free cash flow of $500 million but tighter management of its capital budget and cost cuts helped it improve the situation.
The company said in the filing that its board is considering a receivables security program of between $500 million and $1 billion.
Rating agency Standard & Poor's cut the company's credit ratings last month, citing limited financial flexibility and near-term liquidity concerns.
Qwest's stock has dropped nearly 80 percent in the last 12 months as it cut its growth forecasts due to slowing demand and falling prices for voice and data services. Its shares closed Friday at $8.99.
Qwest said late last week it could be in default by the end of the second quarter, but it has been cutting costs, issuing equity-based securities and selling assets.
Under its existing $4 billion credit facility, Qwest would risk violating covenants if its debt was more than 3.75 times earnings before interest, taxes, depreciation and amortization at the end of any fiscal quarter.
Expecting to generate $300 million to $400 million in negative free cash flow for the first quarter of 2002, the company's outlook has improved. It had previously expected a negative free cash flow of $500 million but tighter management of its capital budget and cost cuts helped it improve the situation.
The company said in the filing that its board is considering a receivables security program of between $500 million and $1 billion.
Rating agency Standard & Poor's cut the company's credit ratings last month, citing limited financial flexibility and near-term liquidity concerns.
Qwest's stock has dropped nearly 80 percent in the last 12 months as it cut its growth forecasts due to slowing demand and falling prices for voice and data services. Its shares closed Friday at $8.99.
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