AT&T has more than $9.7 billion of debt coming due in the next year that it either must pay off or refinance. Altogether, the service provider held about $70 billion in debt at the end of the second quarter, with $60.3 billion of that made up of long-term debt.
Those numbers are cause for concern at Standard & Poors, which said on Wednesday it may issue a downgrade by no more than one notch if AT&T uses excess free cash flow for a share repurchase rather than debt reduction. Indeed, S&P expects AT&T to boast substantial” free cash flow, even after paying its $10 billion annual dividend later this year. Because of that, the ratings agency over the next 90 days will analyze how AT&T uses its cash, particularly as the wireline sector continues to fall prey to wireless substitution and VoIP competition.
Such actions, depending on the magnitude, could reduce the company’s ability to achieve credit parameters consistent with the current rating within a reasonable timeframe,” analyst Richard Siderman said in a press release.
S&P should decide within three months what to do with AT&Ts credit rating.