Moody’s applies Ba1 to Qwest notes

Moody's Investors Service said it assigned a Ba1 rating to Qwest Corp.’s proposed offering of senior unsecured notes due 2057 and placed the rating on review for downgrade.

Proceeds will be used to refinance debt.

All other ratings for Qwest, parent CenturyLink Inc. and all of CenturyLink's rated subsidiary debt, are unchanged and on review for downgrade.

Moody’s said it placed CenturyLink’s Ba2 corporate family rating on review for downgrade on Oct. 31, 2016 after it agreed to purchase Level 3 Communications, Inc. (Ba3, stable) for $24.3 billion. CenturyLink intends to finance the deal with a mix of 40% cash and 60% equity and we estimate that CenturyLink's leverage (Moody's adjusted) will rise to 4.4 times at fiscal year-end 2018 assuming the deal closes by the end of third quarter 2017.

The agency said the transaction will enable CenturyLink to use $9 billion of net operating losses from Level 3, which will offset a portion of the pro forma consolidated company's taxable income for several years.

However, CenturyLink will issue about 521,000 new shares and nearly double its annual cash dividend from $1.2 billion in fiscal year-end 2016 to $2.3 billion, Moody’s added.

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