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September 9, 2002
Following months of speculation over whether his company might be the next large carrier to take the bankruptcy tumble, Qwest Communications International Inc. (NYSE: Q) CEO Richard Notebaert today forcefully denied that Chapter 11 was an option being discussed (see Carrier Scandals: Who's Next?).
“In the 90 days I’ve been there, that word hasn’t come up in my presence other than from outside the company,” he said in a Webcast presentation at Morgan Stanley Dean Witter & Co.’s Global Communications Conference in Miami today. He insisted that the company has not retained bankruptcy counsel.
That claim would have been less credible before the company’s announcement last week that it has renegotiated the terms of $3.4 billion of its bank credit line and has received an additional $750 million bridge loan, providing it with capital until its QwestDex sale is completed (see Qwest Gets $750M Loan). The company announced late last month that it will sell its directory service in two portions for a total of $7.05 billion (see Qwest Sells Directory Service).
That anticipated sale and the new loan terms have leant the carrier more credibility than it has enjoyed in a long time. Since the announcement of the QwestDex sale, the company has seen its shares soar nearly 50 percent. Following Notebaert’s talk today, the company’s stock price has continued to climb, jumping 7.33 percent in afternoon trading to $3.22 a share. Earlier this summer, Qwest’s shares were teetering dangerously close to the $1 mark.
“We have now fixed the solvency issue,” Notebaert said triumphantly at the beginning of today’s presentation. “We have been focused very tightly on revenue generation.”
The carrier isn’t out of the woods yet, however. “We sold Dex for a reason,” he admitted. “We obviously have too much debt.” Qwest currently has a whopping $26.3 billion debt load.
Notebaert would not say which restructuring path Qwest might take, or whether the carrier might try to raise additional cash through an equity-linked offering. “I don’t think it serves anybody well to speculate,” he said.
But all was not left to the imagination. Notebaert admitted that the directory service isn’t the last thing the company will be selling off in an attempt to obtain a healthier balance sheet. Qwest, he said, is looking to eliminate $1 billion a year in cash burn through shutdowns, or complete or partial sales of ten of its non-core businesses. “We need to take a hard look, and we have been taking a hard look, at the businesses we are in,” he said. Although Notebaert didn’t reveal where Qwest is looking to trim, the company has previously indicated that it might try to sell its wireless and access-line businesses (see Qwest Posts Loss, Preps Asset Sales).
Notebaert said about half of the cash burn, which is operational, would be fairly easy to eliminate, while the other half, linked to partnerships, would take longer to get rid of.
— Eugénie Larson, Reporter, Light Reading
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