BT halts $10bn bond sale on credit rating fear

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The Independent Online

British Telecom called a halt yesterday to a planned roadshow set to begin 5 September to market $10bn (£6.5bn) worth of bonds. The cancellation follows indications in recent days by Standard & Poor, the debt rating agency, that the credit ratings of BT, France Telecom and Deutsche Telekom are likely to be downgraded. Last week, BT said its total debt could hit £30bn next year

British Telecom called a halt yesterday to a planned roadshow set to begin 5 September to market $10bn (£6.5bn) worth of bonds. The cancellation follows indications in recent days by Standard & Poor, the debt rating agency, that the credit ratings of BT, France Telecom and Deutsche Telekom are likely to be downgraded. Last week, BT said its total debt could hit £30bn next year

A spokesman for the telecoms giant said: "BT has decided to delay the bond roadshow until further clarification of the credit rating. We're going through a process of credit assessment (and) we're in the course of that process." The assignment of 'credit watch' status by S&P can last up to three months. However, in the case of BT and other telecoms players the watch could last longer due to the high prices being paid by telecoms companies in the ongoing auctions for universal mobile telecom service or UMTS licences.

BT stock reacted badly to the roadshow cancellation, falling 31p to 810p on heavy volume of 40 million shares. The stock is at two-year lows after hitting an all-time high of 1,513p in January.

Since then, a February earnings warning and concern about rising competition in Britain has undermined the stock. In recent weeks, the fears of the hefty cost of buying UMTS licences abroad have also hurt sentiment.

Last week, BT's latest spending spree saw it double a 45 per cent stake in Viag Interkom, Germany's smallest mobile operator, and secure a third generation German mobile licence for a combined expenditure of £9.2bn. In response, S&P put BT's credit rating under review with negative implications and said that the company's rating could be downgraded to mid to low single -A from AA+.

Chief executive Sir Peter Bonfield has pledged to restore BT's rating through a combination of asset sales of non-core operations as well as possible flotations of business units such as its wireless operation. Credit ratings from S&P and other agencies affect the terms and interest rates at which corporations can obtain debt finance.

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