Tulsa telecom company's debt rating lowered

TULSA, Okla. (AP) _ One of the nation's largest credit rating agencies has downgraded Williams Communications Group debt over concerns about $5 billion in obligations amid weak industry conditions.

Thursday, January 17th 2002, 12:00 am

By: News On 6

TULSA, Okla. (AP) _ One of the nation's largest credit rating agencies has downgraded Williams Communications Group debt over concerns about $5 billion in obligations amid weak industry conditions.

Standard & Poor's also indicated the ratings could be downgraded again. Williams Communications executives say the Tulsa-based company remains financially sound.

S&P lowered Williams Communications' credit and senior bank loan ratings from B to CCC+. It lowered the company's senior unsecured debt from CCC+ to CCC- and preferred stock from CCC- to CC.

The issues are considered speculative by Standard & Poor's, or at a greater risk of loss than investment-grade issues with higher ratings.

Credit ratings help investors assess the risk of owning bonds and other debt issues of companies. Lower ratings force companies to pay higher interest rates to attract funding from investors.

Williams Communications transmits video, voice and data signals over its 33,000-mile fiber optic network for long distance carriers, Internet providers and television networks. Its industry had been beset by perceptions that it overbuilt.

Company officials said Standard & Poor's moves reflect weaknesses in the telecommunications industry more than the workings of Williams Communications.

``The only direct effect of this is on our ability to raise capital at market rates, but we're really not in the capital markets right now,'' spokeswoman Deborah Trevino said.

Company officials have said Williams has ample interim financing to run the company and make its debt payments until it begins generating positive cash flow in 2003. Profitability is expected shortly after that.

Standard & Poor's said in a statement that estimated cash and available funding of $1.5 billion at the end of 2001 would likely have to pay for operations and debt service beyond 2002.

That was because the company is unlikely to generate free cash flow from its operations in the meantime to pay all obligations without outside funding.

Debt service and capital expenditures will likely be $1 billion this year and the company may have to follow through with additional funding, assets sales or expense reductions to improve its position, according to S&P.

Williams reported a third quarter loss of $272 million, or 55 cents a share, up 81 percent from a year earlier. But revenue grew 42 percent.

Fourth quarter earnings are expected to be released on Feb. 6.