S&P lowers Lumen ratings

S&P said it cut Lumen Technologies Inc.’s issuer rating to CCC+ from B and its senior unsecured debt to CCC- from CCC+. The agency also lowered Lumen’s senior secured debt, Level 3's senior secured debt, and Qwest Corp.'s senior unsecured debt to B from BB-, the issue-level rating on the unsecured debt at Qwest Capital Funding Inc. to B- from B+ and the issue-level rating on Level 3's unsecured debt to CCC+ from B.

“The two-notch downgrade reflects our view that Lumen's capital structure is unsustainable longer term. We expect the company's operating and financial performance will remain challenged for the next couple of years as its turnaround plan faces significant challenges. Unlike many of its peers that are building out fiber-to-the-home (FTTH) to better compete in the residential market and grow revenue, Lumen derives about 80% of its revenue from business customers, a segment that is in secular decline given the ongoing migration to less expensive, newer technologies from legacy services,” S&P said in a press release.

Perhaps even more troubling was “the recent announcement that a large group of lenders has formed to discuss debt covenants and capitalization has historically proven to be a good indicator that a debt restructuring, or exchange is a likely outcome,” the agency warned.

The outlook is negative.

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