GTE’s MCI bid
By Rick Daysog
may hurt Hawaiian Tel
Star-BulletinGTE Corp.'s proposed $28 billion acquisition of MCI Communications Corp. could have a negative impact on GTE Hawaiian Tel. Standard & Poor's Creditwire today placed bonds and other debt issued by Hawaiian Tel along with those issued by all other GTE subsidiaries on negative credit watch.
The MCI takeover could mean a "substantial increase" in GTE's and MCI's debt loads if the deal goes through, the rating agency said.
GTE told analysts today that the proposed merger could raise its overall debt to $54 billion.
"If GTE's offer is successful, the combined company would have a weaker financial profile than either GTE or MCI on a stand-alone basis," Standard & Poors said.
Hawaiian Tel officials had no immediate comment this morning.
The local telephone company has issued about $500 million in long-term debt to finance capital expenses, according Securities and Exchange Commission filings. Hawaiian Tel's bonds and debt carry a healthy single-A rating.
A negative watch on the bonds means that the rating agency could downgrade a bond's rating within six months. A downgrade can lead to the company paying a higher interest rate on its debt.
Stamford, Conn.-based GTE and its subsidiaries have about $17.6 billion in debt and $1.3 billion in preferred stock outstanding.
The rating action comes after GTE yesterday set off one of the biggest bidding wars in corporate history with an unsolicited, $40 per-share offer for MCI, the nation's second largest long-distance company.
Two weeks ago, fast-growing WorldCom Inc., based in Jackson, Miss., offered to buy MCI for $30 billion in stock plus $5 billion in assumption of debt. That came about a year after MCI accepted a merger offer from from British Telecommunications Plc., which was valued at $21 billion.
