S&P keeps CenturyTel on negative watch

Standard & Poor's said that CenturyTel Inc.'s BBB+ corporate credit rating, BBB+ senior unsecured debt rating and A-2 commercial paper remain on CreditWatch, where they were placed with negative implications on Jan. 13. This CreditWatch update follows the company's announcement that it intends to repurchase up to $1 billion of its common stock and to increase the company's quarterly cash dividend.

The initial financial impact on CenturyTel will result in higher pro forma debt to EBITDA of roughly 2.4x compared with about 2x prior to the transaction. S&P said that leverage should decline to closer to current levels by year-end 2006 as a result of free cash flow generation and, therefore, the current CreditWatch listing is based on heightened business risk rather than concerns about financial parameters.

The ratings on CenturyTel were initially placed on negative CreditWatch based on the higher level of uncertainty about the business prospects for the local wireline business of the investment-grade telecommunications carriers. The negative CreditWatch reflects S&P's concerns that, in addition to wireless substitution, cable telephony deployment has begun to make inroads in CenturyTel's markets.

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