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
it used to account for network arrangements with Global
Crossing Ltd.

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