Fitch: CenturyLink on watch

Fitch Ratings said CenturyLink, Inc.'s BBB- long-term issuer default, senior revolving credit facility and senior debt ratings and its F3 short-term issuer default and commercial paper ratings as well as Embarq Corp.'s BBB- issuer default rating will remain on Rating Watch negative, where they were placed on April 22, 2010.

Fitch said it also affirmed Embarq's senior notes and senior revolving credit facility at BBB- with a stable outlook.

CenturyLink and Qwest Communications International, Inc. have a pending agreement to merge in an all-stock transaction. Fitch expects to finalize CenturyLink's ratings following the receipt of the final approvals and prior to the close of the merger, the agency said.

The final review of the ratings will take into account expectations for the merged company's future financial performance, the underlying operating environment, the integration costs incorporated into the transaction and the outcome of the regulatory approval process, Fitch said.

After the close of the acquisition, CenturyLink's exposure to secular pressures will have increased, much as it did with the 2009 acquisition of Embarq with its higher suburban/urban profile.

CenturyLink's current ratings reflect its high EBITDA margins and strong cash flow before capital spending and dividends as well as the effects of the slow economic recovery on results, the agency said.

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