plan to save Qwest $300 million
Investors push telco for larger buyback
By Jeff Smith, Rocky Mountain News
Friday, November 17, 2005
Qwest Communications said Wednesday that its annual interest
expenses will be cut by more than $300 million because of
the success of a debt refinancing plan. The Denver telco
said it had increased the size of its offer to buy back
high-interest debt from $3 billion to about $3.4 billion
because of strong investor demand. Earlier this week, Qwest
sold $1.25 billion of 3.5 percent convertible notes - $250
million more than initially envisioned.
Qwest is using cash and the proceeds from the convertible
note sale to buy back debt carrying interest rates of 13
percent to 14 percent.
The success of the two-step process "marks a defining step
in the company's transformation," Oren Shaffer, the
company's financial officer, said in a statement. He added
that the refinancing, plus operational improvements, will
accelerate the company's timetable to profitability.
Qwest executives have indicated the telco could turn a
profit next year. Some analysts agree; others think Qwest
will post a narrow loss.
The company also says it can boost revenue by $500 million
if it can reach industry market penetration averages for
such products as DSL high-speed Internet and long- distance.
Qwest continues to suffer serious erosion in its traditional
telephone business in its 14-state region. Based on
third-quarter numbers, Qwest was losing nearly $300 million
a year in local voice revenues.
The company's bond ratings remain in the "junk" category,
though they are climbing closer to investment grade.