S&P: Sprint Nextel on watch

Standard & Poor's said it placed the BBB- corporate credit rating and all other ratings on Sprint Nextel Corp. on CreditWatch with negative implications following the company's announcement about first quarter results that include post-paid subscriber losses.

S&P said the company's business profile may no longer support an investment-grade rating: Erosion in the subscriber base and resulting decline in EBITDA were much higher than expected.

Sprint Nextel said it would draw $2.5 billion of the $3 billion available under its $6 billion revolving credit facility to mitigate potential refinancing risk related to the $1.25 billion in bonds due November 2008, as well as about $400 million outstanding under its commercial paper program and $600 million of bonds due May 2009.

The issuer cited concerns about capital market conditions over the next year, and the agency said it believes that a decline in the business, coupled with the higher debt levels, could narrow the cushion under the senior unsecured credit facility, which contains a 3.5 times maximum debt-to-EBITDA maintenance covenant.

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