SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 14, 2002
QWEST CORPORATION
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(Exact name of registrant as specified in its charter)
Colorado
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(State or other jurisdiction of incorporation)
001-03040 84-0273800
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(Commission File Number) (IRS Employer Identification No.)
1801 California Street Denver, Colorado 80202
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 303-992-1400
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Not applicable
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(Former name or former address, if changed since last report)
ITEM 5. Other Events.
The Company's ultimate parent, Qwest Communications International Inc.
("Qwest"), recently announced that it had taken steps to address short-term
liquidity pressures in the commercial paper market by drawing down on its $4
billion bank credit facility, and discussing terms and other issues related to
that credit facility. As part of this drawdown, the Company fully drew down the
$1 billion available to it under the credit facility.
Under the credit facility the Company is a co-borrower with a financing
subsidiary of Qwest and Qwest has guaranteed that subsidiary's obligations. As
Qwest had previously disclosed, Qwest and the Company are subject to a
limitation on the total amount of outstanding debt for Qwest and its
subsidiaries as of the end of any fiscal quarter of no more than 375% of its
EBITDA for the four previous fiscal quarters ending on that date. Because this
and other covenants and events of default under the facility relate not only to
the Company but also to Qwest and its financing subsidiary, those companies
could potentially trigger a default under the agreement that could cause the
Company's outstanding borrowings at the time of such default to become
immediately due and payable.
As Qwest previously announced, if it does not take any actions to reduce its
total debt, it believes that, based on its current internal projections, its
total debt will exceed its maximum allowable debt under the credit facility at
the end of the second quarter of 2002, resulting in defaults. However, Qwest and
the Company are working with the lenders under the credit facility to modify the
debt limitation and make other modifications to the credit facility. The Company
believes that it will reach agreement on these modifications on terms acceptable
to it and the lenders.
In addition, as Qwest previously announced, it is also taking steps to reduce
its capital expenditures, and operating expenses and total debt. The steps to
reduce its total debt include, among others, issuing equity-based securities,
sales of assets or of securities associated with those assets, including, among
others, wireless, access lines, directories, its applications service provider
business and other non-core assets.
The Company used the proceeds of its $1 billion portion of the total drawdown to
repay debt. As Qwest had previously announced, Qwest continues to expect to turn
free cash flow positive in the second quarter of 2002. After giving effect to
the borrowings under the bank facility, Qwest's net debt outstanding remains
approximately $24.9 billion. Qwest also announced that it is exploring
additional longer term refinancing options. The form and timing of the Qwest
refinancing will depend on market conditions. Any refinancing option is not
expected to increase Qwest's total net debt outstanding. The Company has
investment grade credit ratings on its long-term debt. The ratings are BBB+, A3
and BBB by Fitch Ratings, Moody's Investor Services and Standard and Poor's,
respectively.
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Forward Looking Statements Warning
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This Current Report on Form 8-K contains projections and other forward-looking
statements that involve risks and uncertainties. These statements may differ
materially from actual future events or results. Readers are referred to the
documents filed by Qwest Corporation (together with its affiliates, "the
Company," "we" or "us") with the Securities and Exchange Commission,
specifically the most recent reports which identify important risk factors that
could cause actual results to differ from those contained in the forward-looking
statements, including but not limited to: potential fluctuations in quarterly
results; intense competition in the markets in which we compete; changes in
demand for our products and services; the duration and extent of the current
economic downturn, including its effect on our customers and suppliers; adverse
economic conditions in the markets served by us or by companies in which we have
substantial investments; dependence on new product development and acceleration
of the deployment of advanced new services, such as broadband data, wireless and
video services, which could require substantial expenditure of financial and
other resources in excess of contemplated levels; higher than anticipated
employee levels, capital expenditures and operating expenses; rapid and
significant changes in technology and markets; adverse changes in the regulatory
or legislative environment affecting our business; delays in our ability to
provide interLATA services within our 14-state local service area; failure to
maintain rights-of-way; and failure to achieve the projected synergies and
financial results expected to result from the acquisition of U S WEST, and
difficulties in combining the operations of the combined company.
The Company cautions that certain asset sales or other transactions could be on
terms it considers uneconomic and could be subject to the approval of federal or
state regulatory authorities. Such approvals, if granted, could be subject to
conditions that could adversely affect the benefits to the Company of completing
the transactions and could be otherwise burdensome. The conditions could
include, but are not necessarily limited to, requirements that the Company apply
a portion of the proceeds for additional investments in certain states or to
reduce charges in such states. The amounts of such investments or rate
reductions could be significant and uneconomic. In addition, with respect to any
sale of certain of the access lines, depending upon the number of access lines
and purchasers, the purchasers may become subject to additional regulatory
requirements, including but not limited to those imposed upon incumbent local
exchange carriers, which could limit the number of potential purchasers or the
price any purchasers might be willing to pay. There can be no assurance that the
Company and Qwest can modify their credit facility or enter into a new facility
on terms satisfactory to them, complete any de-leveraging transactions to reduce
total debt, or otherwise take actions to ensure satisfaction with the existing
limitations contained in the credit facility.
The information contained in this Current Report on Form 8-K is a statement of
the Company's present intention, belief or expectation and is based upon, among
other things, the existing regulatory environment, industry conditions, market
conditions and prices, the economy in general and the Company's assumptions. The
Company may change its intention, belief or expectation, at any time and without
notice, based upon any changes in such factors, in the Company's assumptions or
otherwise. This Current Report on Form 8-K includes analysts' estimates and
other information prepared by third parties for which the Company assumes no
responsibility. The Company undertakes no obligation to review or confirm
analysts' expectations or estimates or to release publicly any revisions to any
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
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By including any information in this Current Report on Form 8-K, the Company
does not necessarily acknowledge that disclosure of such information is required
by applicable law or that the information is material.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
QWEST CORPORATION
DATE: March 4, 2002 By: /s/ BRYAN TREADWAY
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Bryan Treadway
Vice President and Controller
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