Capital Markets

S&P Cuts AT&T to ‘Junk’

Debt-rating firm is the third to downgrade the telecom giant's rating.
Stephen TaubAugust 5, 2004

AT&T has scored a dubious hat-trick.

On Tuesday, Standard & Poor’s cut the telecom giant’s debt ratings to junk. This follows similar moves made recently by the other two major debt-rating firms — Moody’s and Fitch.

“The ratings downgrade reflects the company’s continued challenging business risk profile” derived from “the telecom industry’s transformation and the resultant long-term impact on the company’s financial profile,” said S&P credit analyst Rosemarie Kalinowski. “We anticipate that competition will intensify from other large long-distance carriers, the regional Bell operating companies (RBOCs), and cable TV companies in the near-to-intermediate term, further affecting AT&T’s weak operating margins.”

The negative factors are softened a bit in the short term by AT&T’s solid balance sheet and liquidity position, the rating agency added. S&P lowered its long-term corporate credit and senior unsecured debt ratings on AT&T to BB-plus from BBB and its short-term rating of the telecom to B from A-3.

In other debt-related news, at least two companies trotted out jumbo offerings a few days ahead of the Federal Reserve’s widely anticipated rate hike next week.

SunTrust Banks, Inc. raised $1 billion from a four-part senior note sale, led by Goldman Sachs & Co. and Morgan Stanley. It issued $100 million in three-year floating-rate notes, $250 million in three-year notes, $350 million in four-year notes, and $300 million in five-year notes.

Procter & Gamble issued $1.5 billion in two-part global debt. It sold $900 million in 10-year notes, led by Goldman Sachs, J.P. Morgan, and Morgan Stanley. It also issued $600 million in 30-year bonds, led by Goldman Sachs, J.P. Morgan, and Citigroup Global Markets
Inc.

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