AT&T to sell assets?

November 7, 2000: 10:47 p.m. ET

Tells credit agencies it plans to cut debt; action could forestall downgrades

NEW YORK (CNNfn) - AT&T Corp., facing intense scrutiny from credit-rating agencies because of its $62 billion debt load, is planning major, nonstrategic asset sales over the next several months, according to a published report.

The big telecom company has disclosed to credit agencies that it plans a "significant deleveraging" of its balance sheet, a move that could help the company avoid additional credit downgrades, The Wall Street Journal's Web site reported Tuesday night.

AT&T (T: Research, Estimates), which two weeks ago announced a plan to split itself into three separate, publicly traded companies, has been on shaky ground with credit-rating agencies, the Journal reported. In addition to the heavy debt load, the agencies also are concerned about the capital structures of the new businesses and how AT&T will allocate debt to each unit, the story said.

Both Moody's Investors Service and Standard & Poor's credit-rating agencies have AT&T on a "credit watch negative," meaning the company's ratings could be downgraded at any time.

	WHY TRIM DEBT?
		Both Moody's Investors Service and Standard & Poor's credit-rating agencies have AT&T on a "credit watch negative," meaning the company's ratings could be downgraded at any time.

Monday, S&P downgraded AT&T's long-term debt but said it would hold off on further downgrades because AT&T management "has indicated it's committed" to cutting some debt, the Journal reported. Analysts believe AT&T is planning to shave off as much as $25 billion of debt from its books, the story said.

"AT&T's financial position continues to be solid," an AT&T spokeswoman told the Journal. "We generate very strong cash flow and are committed to improving our balance sheet through the continued divestiture of nonstrategic assets."

Those assets are likely to include the equity investments that AT&T inherited through its acquisition of both TCI and MediaOne, cable-TV companies, the story said. Two of the most significant divestitures would be the sale of AT&T's 25 percent stake in Time Warner Entertainment and its 30 percent stake in Cablevision Systems Corp., it added.

AT&T has been looking to sell its stake in Time Warner Entertainment to help satisfy a federal requirement that it divest itself of either cable or programming assets to comply with rules limiting cable ownership. Time Warner Entertainment is majority-owned by Time Warner Inc., which is the parent company of CNNfn.com.

Signs of AT&T's worsening credit pinch began surfacing about two weeks ago, following the company's disappointing third-quarter earnings and news of the planned restructuring, the Journal reported.

Interest payment on all of AT&T's debt alone is expected to cost about $3 billion this year, the story said . Its dividend, which AT&T plans to cut in the future from the current 22 cents a share quarterly, costs AT&T another $3.3 billion a year, the story said. The combined total cuts heavily into AT&T's $23 billion in annual earnings before interest, taxes, depreciation and amortization.