Correction: Fitch Ratings Dwngr Qwest; Maintains Neg Outlook.

Business Editors

NEW YORK--(BUSINESS WIRE)--Feb. 14, 2002

(In a press release from earlier, Fitch Ratings incorrectly listed the Qwest Communications International's senior unsecured rating as secured. The amended version follows.)

Fitch Ratings has downgraded Qwest Communications International's (Qwest) senior unsecured rating to 'BBB' from 'BBB+'. Other units affected include Qwest Capital Funding (which is guaranteed by Qwest) and LCI International, both of which have had their senior unsecured ratings downgraded to 'BBB' from 'BBB+'. Qwest Corporation senior unsecured rating has been downgraded to 'BBB+' from 'A'. In addition, the commercial paper ratings of both Qwest Capital Funding and Qwest Corporation have been downgraded to 'F3'. All ratings are on Rating Outlook Negative.

The downgrades reflect Fitch's view that the liquidity of the company has been materially reduced following the draw down of its previously untapped $4 billion bank facility on February 13 and 14. The company recently has had difficulty rolling over maturing commercial paper at maturities beyond seven days and thus such balances have continued to build. The 'F3' rating on Qwest's commercial paper programs reflects the low ability to access the commercial paper market. Consolidated Qwest recently had approximately $3.2 billion in commercial paper outstanding, and has approximately $1.2 billion in maturing long term debt. Qwest intends to pay off commercial paper as it comes due with proceeds obtained from the bank facility.

Qwest's bank facility expires May 4, 2002, but contains a one-year term out option at the option of the company. The most significant performance covenant in the agreement requires a maximum debt-to-EBITDA ratio of 3.75 times.

To improve its near-term liquidity position, Qwest is expected to try to access the longer term capital market and this could potentially include equity securities or securities with a high equity content. Such securities could amount up to $1.25 billion as Qwest has previously disclosed, with the total equity attributed being somewhat lower than this amount, depending on the nature of the security. Qwest filed a registration statement with the Securities and Exchange Commission (SEC) on February 5, 2002 in connection with the possible issuance of equity-linked securities.

Mitigating the near-term liquidity issues is Qwest's strong local exchange business, which provides approximately 90 percent of the consolidated company's EBITDA (consolidated EBITDA was $7.4 billion on a normalized basis in 2001). The company's local exchange business is expected to produce stable cash flows in 2002 despite the continued pressure of competition.

Fitch previously had revised Qwest's Rating Outlook to Negative on December 13, 2001 based on a revised operating outlook for the company. The Negative Outlook reflected Fitch's expectation for Qwest to operate with higher leverage over the course of 2002 than previously anticipated. Fitch expects Qwest's debt-to-EBITDA to approximate 3.5X at the end of 2002.

For 2002, Qwest anticipates its EBITDA to be at the low end of a range of $7.1 billion to $7.3 billion. Qwest is expected to reach a net free cash flow positive position in the second quarter of 2002 and remain in that position for the duration of the year as its capital spending will be front end loaded.

To resolve the rating outlook that exists at the current, 'BBB' level, Fitch will continue to monitor Qwest's operating performance in the currently weak environment for telecom services, as well as evaluate measures Qwest may undertake to strengthen its balance sheet. Such measures may include the sale of noncore assets and/or the issuance of equity-like securities. Fitch will also monitor Qwest's progress to a net free cash flow position and expectations for free cash flow levels into 2003. Successful execution on these transactions, the resolution of the near-term liquidity issues and the stabilization of operating performance approximating the current level of performance could lead to an affirmation of the 'BBB' rating and the revision of the Rating Outlook to Stable.

Finally, Fitch considers the rating of Qwest Corporation to be closely tied to the rating of Qwest, and has thus downgraded Qwest Corporation two notches to 'BBB+', but is maintaining a one notch differential versus Qwest's rating due to the underlying strength and inherent stability of Qwest Corporation's local exchange business.