What was the main reason for Moody's rating actions on Verizon?

Moody's upgraded Verizon's outlook to stable due to the company's dramatic debt reduction and the elimination of specific uncertainties. However, the long-term debt rating was lowered one notch to A2, reflecting Moody's broader negative outlook on the entire telecom industry at the time.

How has Verizon improved its financial position regarding debt?

Verizon has made significant strides in reducing its debt. They reduced net debt by 18% in the first nine months of 2002 and expected to finish the year with net debt below their target of $55-$56 billion. Additionally, commercial paper outstanding saw a substantial decrease of over 75%.

Does Verizon agree with Moody's overall view of the telecom industry?

No, Verizon's CFO stated that the company disagrees with Moody's negative view as it pertains to Verizon specifically. They believe their strong cash flow, diverse asset mix (wireline and wireless under one brand), and solid business fundamentals set them apart from other companies in the telecom sector.

What is the impact of the rating changes on Verizon's financing?

Verizon's CFO indicated that with a 'solid A' status (referring to the A2 rating), the company continues to have a full range of financing options available and expects to maintain excellent access to the capital markets.

VZ 8-K SEC Disclosure — Dec 18, 2002

Summary

Verizon Communications Inc. (VZ) issued an 8-K filing on December 18, 2002, detailing a press release from its CFO, Doreen Toben. The release addresses Moody's Investors Service's recent rating actions, specifically an upgrade of Verizon's outlook to stable from negative, while simultaneously lowering its long-term debt rating from A1 to A2. Despite disappointment with the downgrade, Verizon emphasizes its significant progress in debt reduction and operational certainty as key factors behind the stable outlook. The company highlighted a substantial decrease in net debt, projecting it to be below the previously announced target for year-end 2002. Furthermore, commercial paper outstanding has been dramatically reduced, indicating improved liquidity. Verizon also noted the elimination of specific uncertainties, such as its exposure to the NextWave wireless auction and questions surrounding Genuity's integration, which have eased concerns for rating agencies. The company believes its strong cash flow, diverse asset base (including wireline and wireless under a single brand), and solid business fundamentals differentiate it within the challenging telecom industry, maintaining that it retains strong financing flexibility.

Key Highlights

1Moody's Investors Service upgraded Verizon's outlook to 'stable' from 'negative'.
2Moody's lowered Verizon's long-term debt rating by one notch, from A1 to A2.
3Verizon achieved significant debt reduction, decreasing net debt by 18% through the first nine months of 2002 and expecting further reduction by year-end.
4Commercial paper outstanding was reduced by over 75%, from $12.8 billion at the end of 2001 to approximately $3 billion at the end of Q3 2002.
5Specific company-specific uncertainties, including NextWave wireless auction exposure and Genuity integration questions, have been eliminated.
6Verizon CFO expressed commitment to continued debt reduction, improved liquidity, and free cash flow generation.
7The company believes its strong cash flow, diverse assets (wireline/wireless), and solid fundamentals differentiate it from industry peers.

VERIZON COMMUNICATIONS INC 8-K Report (Dec 18, 2002)

Summary

Key Highlights

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