Capital Markets

Qwest Issues More Shares to Reduce Debt

Since June, it has issued about 18.6 million shares, but those transactions have pared its $17.5 billion debt by only $81 million.
Stephen TaubSeptember 19, 2005

Qwest Communications International Inc. is issuing new shares of common stock in an effort to reduce its hefty $17.5 billion of debt, according to a regulatory filing.

The telecommunications company disclosed that since June, it has issued about 18.6 million shares in a number of separately and privately negotiated direct-exchange transactions. According to the filing, however, the transactions have enabled the company to pare its debt by only $81 million.

Issuing new shares has increased the total outstanding by a mere 1 percent, but Qwest has still come in for a fair amount of criticism. “It’s a regrettable move that they have to make,” Mimi Hull, a Qwest shareholder and president of the Association of US West Retirees, told the Denver Post. “Qwest has painted itself into a corner. This is a last resort.”

Qwest spokesman Bob Toevs told the paper that the company has made similar swaps since 2003.

In early August, Qwest also registered to sell up to $2.5 billion in new, various securities, including equity, debt, and preferred stock.

“If they continue to dribble out stock at this pace, it’s going to put some downward pressure on the stock,” Janco Partners analyst Donna Jaegers told the Post. “But this is a very small move.”

Since Richard Notebaert took over as Qwest’s chairman and chief executive officer in 2002, the company has reduced its debt from $26 billion from a combination of sources, including asset sales.