The future is dim for “speculative-grade” U.S. telecom and cable television companies, which have approximately $19 billion of debt maturing by the end of 2005, according to a report published today by Standard & Poor's Ratings Services.
"For much of the $19 billion of speculative-grade debt coming due through
2005, most of which is in the 'B' rating category, refinancing prospects range from worrisome to highly doubtful," says Standard & Poor's credit analyst Richard Siderman. "Upcoming maturities pose a particularly difficult challenge for the weakest of these companies, given the market's limited appetite for high-yield telecom debt and the scarcity of other funding options"
According to Standard & Poor's, about $306 billion of total U.S. telecom and cable television debt, $63 billion, or almost 21 percent, will come due through 2005. A little more than two-thirds of this maturing debt is investment grade, and much of this is held by the three investment-grade regional Bell operating companies, AT&T Corp., and some
of the major wireless carriers, according to the report. However, the remaining $19 billion of debt coming due through 2005 is held by companies with speculative-grade ratings and may be difficult to refinance.
For debt rated in the speculative-grade categories of 'BB+' and lower, a large portion is concentrated among just a few issuers: Qwest Communications (B-/Developing/--) has more than $6 billion of debt coming due through 2005; Charter Communications (CCC+/Watch Neg/--) has more than $1.5 billion maturing in the next three years, although mostly not until 2005; and Loral Space & Communications Ltd. (CCC+/Negative/--) has more than $1.1 billion maturing through 2005.
Several speculative-grade companies facing substantial near-term maturities have limited options, particularly those with ratings on CreditWatch Negative, according to the report. Exchanging debt for equity or debt for debt is one way for companies to meet maturities, although this is often used as a last resort. Standard & Poor's expects to see several companies pursue this avenue in 2003.
