The bank debt ofQwest Communications International was believed to have traded around the 88 1/2 level last week after the company received relief from one of its covenants. The company's debt-to-EBITDA ratio was scheduled to drop from 4.25 times to four times at the end of the year, but an amendment increased the allowable leverage ratio to six times for the life of the loan, which has been pushed out for two years to May 2005. Had it not received the amendment, Qwest would have been in default of its credit agreement.
The relief, however, does not come without concessions on the part of Qwest. In conjunction with the amendment, the company must use a portion of the proceeds from the sale of its directories business, known as QwestDex, to reduce the $3.4 billion credit facility. The amendment calls for the loan to be reduced to $2 billion after the completion of the first phase of the sale and to $1.25 billion after the completion of the second phase.
Qwest's bank debt was last seen rising from the 58-62 range into the low 80s after the company announced the sale of QwestDex. A spokesman declined to comment on the trade, but he noted that the company was pleased with the sale of QwestDex, which provides the parent with an additional $750 million in liquidity at the subsidiary level until the sale is completed.