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RealTime IT News

Trouble Mounts at Qwest

Qwest Communications Chairman and Chief Executive Officer Joseph Nacchio put time in for spin doctoring Wednesday evening, telling investors and analysts he has narrowed down the number of bidders for the carrier's directory service to six and expects to reap $8 billion to $10 billion from the sale.

He and other executives at the financially strapped telephone company are going to need every penny from the sale after three crippling blows to its perceived value were delivered in the space of 12 hours.

Late Wednesday evening, Standard & Poor's dropped Qwest's credit rating to junk status, saying the carrier would be in dire straits with debt holders if it didn't get the money from the directory services sale (expected in June). In February, S&P dropped Qwest's short- and long-term credit rating.

The double-B-plus rating, the highest level of junk credit rating, seriously hinders any attempts to apply for loans or credit, leaving asset sell-offs the only real chance to bring in money.

Later that evening, in the Netherlands, KPNQwest's entire supervisory board (Nacchio is chairman of the board) announced its resignation before filing for credit protection under Dutch moratorium laws. Thursday morning, executives filed for bankruptcy protection. Remaining officials said, "there is a substantial risk there may be no underlying value to either its debt or equity securities" at the bankruptcy press conference.

Qwest, which has a 47.5 percent majority stake in the company, reportedly would not extend more credit to the Pan-European carrier. Last year's 14 million share buyout was the last major investment made by Qwest in its European venture.

The carrier is still the subject to a U.S. Securities and Exchange Commission (SEC) probe for alleged financial trickery it used to account for network arrangements with Global Crossing Ltd.