AT&T Prices Stock Offering, Plans To Renegotiate $8 Billion Credit Facility

The disclosure in a filing with federal regulators came as AT&T reported that the new stock it is selling to meet a looming multibillion-dollar obligation has been priced at $11.25, a further discount to current depressed levels.

The downgrade last week by Moody's Investors Service means the annual interest expense on $10.1 billion worth of AT&T bonds would increase by about $50 million starting later this year, the company said Wednesday in a filing with the Securities and Exchange Commission.

In addition, due to the planned sale of AT&T's cable TV business to Comcast, the lower debt rating could add costs of up to $100 million per year if AT&T needs to borrow from a line of credit for short-term cash requirements.

At present, in contrast with AT&T's hefty long-term debt of $34 billion, the company doesn't owe anything on its existing $8 billion line of short-term credit.

However, the filing said, AT&T has begun talks with lenders to replace or renegotiate that credit line since its terms would be violated by the combination of a reduced debt rating and the loss of cash flows from the cable business. The cable deal is expected to be completed in the fall.

"We can do the Comcast merger without a short-term credit facility, but AT&T is a more conservative company that that, so we've begun renegotiating," said spokeswoman Eileen Connolly. "We'll have a new credit facility that will be there and in place so no one has fears that the (cable deal) can't proceed."

Connolly also said the company expects the Comcast deal to help improve AT&T's credit rating by eliminating as much as $20 billion of the company's debt.

The Moody's downgrade was blamed on the ever-worsening outlook for the long-distance calling and data services market. In particular, Moody's noted the growing competition in long distance from the local Bell phone companies as well as wireless phones and e-mail.

Separately, AT&T announced late Wednesday that its plan to raise $2.25 billion by selling stock had started with the pricing of 200 million new shares at $11.25. AT&T stock finished Friday down 35 cents a share at $11.40 on the New York Stock Exchange.

An additional 30 million shares could be sold by the investment banks handling the offering if demand for the new stock is strong.

The money raised in the stock offering will be used to satisfy part of a 1999 agreement to acquire the remaining 69 percent of AT&T Canada by June 2003.

That deal called for AT&T to buy all the outstanding stock of AT&T Canada at set prices, starting with $23.61 per share in June 2000, plus an additional 4 percent with each passing quarter over the following three years.

None of the stock has been purchased yet, and so the current cost of those shares stands at about $3.4 billion overall.

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