Covad Communications Group Inc. Ratings Placed on CreditWatch Negative
NEW YORK (Standard & Poor's CreditWire) Feb. 21, 2001--Standard
& Poor's today placed its single-'B'-minus corporate
credit and senior unsecured debt ratings on digital subscriber line (DSL)
provider Covad Communications Group Inc. on CreditWatch with negative
implications.
The CreditWatch placement follows Covad's recent announcement
that its restructuring charges will be substantially higher than the $20
million previously estimated, at between $50 million and $100 million. The
potential for additional cash requirements in 2001 to implement
Covad's restructuring plans exacerbates concerns about the
company's near-term liquidity and poses concerns about the degree to
which cash balances will fund the company's capital and operating
requirements through 2001.
Covad's dependence on Internet service providers (ISPs) as the
primary sales channel for the sale of its DSL services to businesses and
consumers has adversely affected the company's business and financial
profile in 2000. Many of these ISPs have either gone bankrupt or been slow
to reimburse Covad for lines sold. As a result, the company announced in
November 2000 that it would restructure operations to preserve cash, as
its access to the capital markets had closed. This restructuring includes
the close of some 260 central offices and the suspension of plans for 500
new ones, as well as the reduction of 800 employees. Moreover, Covad has
also announced that it is delaying its earnings reporting for the fourth
quarter of 2000 because of an ongoing review of accounting procedures and
the need to further quantify the overall cost of restructuring. This delay
heightens Standard & Poor's concerns about near-term liquidity
prospects, as it could potentially reduce investor confidence, further
affecting the company's ability to obtain additional funding. --
CreditWire
| Credit Analyst: | Catherine Cosentino, New York (1) 212-438-7828 |
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