Qwest has issued new shares to buy out existing bondholders and ratchet down its heavy load of $17.5 billion in debt, according to a Friday filing with the Securities and Exchange Commission.
Since June 30, Qwest has issued enough shares to buy up only $81 million in debt. The 18.6 million new shares represent just over 1 percent of Qwest’s total pool of shares.
But issuing new shares dilutes the holdings of existing shareholders.
“It’s a regrettable move that they have to make,” said Mimi Hull, a Qwest shareholder and president of the Association of US West Retirees. “Qwest has painted itself into a corner. This is a last resort.”
The equity-for-debt swaps, which were negotiated privately and are not open to the public, are not a surprise. Qwest has made similar swaps since 2003, said Qwest spokesman Bob Toevs. Qwest also registered with the SEC in August to sell up to $2.5 billion in new securities.
Qwest’s announcement came after the close of the New York Stock Exchange on Friday.
“If they continue to dribble out stock at this pace, it’s going to put some downward pressure on the stock,” said Janco Partners analyst Donna Jaegers. “But this is a very small move.”
Deleveraging Qwest’s balance sheet has been a major priority of Dick Notebaert, who arrived at Qwest in June 2002 when the Denver-based phone provider had $26 billion in debt.
That same year, Notebaert began restructuring Qwest’s debt and sold Qwest’s Dex directory business for $7 billion. In June, Qwest issued $1.75 billion in debt, some of which was used to replace older debt.
Staff writer Ross Wehner can be reached at 303-820-1503 or rwehner@denverpost.com.
