Fitch Ratings Affs Verizon Network Funding; Lwrs Global Funding CP Rtg.Business Editors CHICAGO--(BUSINESS WIRE)--March 22, 2002 Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. Verizon Global Funding's 'A+' senior unsecured rating and the 'A+' implied senior unsecured rating of Verizon Communications
Verizon Communications, Inc. . The commercial paper rating of Verizon Network Funding, which issues short-term debt Short-term debt Debt obligations, recorded as current liabilities, requiring payment within the year. for the 'AA' rated operating telephone companies, has been affirmed at 'F1+'. The commercial paper rating of Verizon Global Funding has been lowered to 'F1' from 'F1+' to align align (  līn),v to move the teeth into their proper positions to conform to the line of occlusion. the rating to Fitch's policy limiting commercial paper ratings for 'A+' long-term issuers to 'F1'. The long-term ratings assigned to the debt of Verizon's operating telephone companies, listed at the end of this release, have also been affirmed. Verizon Global Funding, which primarily funds the nonregulated operations of Verizon, is a subsidiary of Verizon Communications, and benefits from a support agreement with Verizon Communications. The Rating Outlook for all ratings is Stable. Fitch's affirmation A solemn and formal declaration of the truth of a statement, such as an Affidavit or the actual or prospective testimony of a witness or a party that takes the place of an oath. An affirmation is also used when a person cannot take an oath because of religious convictions. of the long-term ratings reflects Verizon's stable operating performance, significant scale and scope in its domestic wireline and wireless businesses and management's commitment to delever its balance sheet over the near future. Although Fitch normally requires 'F1' issuers to maintain 100% back-up of their commercial paper balances, Fitch views Verizon's $7.5 billion credit facility as adequate back-up for its commercial paper. Fitch takes into consideration the fact that about $5.3 billion of its $12.8 billion commercial paper issued at year-end 2001 was issued by 'F1+' rated Verizon Network Funding (for which 75%back-up is appropriate) and that the longer dated maturities of its commercial paper at Verizon Global Funding provide greater financial flexibility. Verizon is also expected to reduce commercial paper balances once certain asset sales close in mid-year. Fitch expects continued growth in Verizon's wireless business, long distance entry and digital subscriber line See DSL. (communications, protocol) Digital Subscriber Line - (DSL, or Digital Subscriber Loop, xDSL - see below) A family of digital telecommunications protocols designed to allow high speed data communication over the existing copper telephone lines between end-users and (DSL DSL in full Digital Subscriber Line Broadband digital communications connection that operates over standard copper telephone wires. It requires a DSL modem, which splits transmissions into two frequency bands: the lower frequencies for voice (ordinary ) growth to mitigate mit·i·gate v. To moderate in force or intensity. mit  i·ga tion n. the impacts of competition on its local wireline subscriber base. In
addition, data service revenues provided to enterprise customers are
also expected to continue to grow. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become margins are expected to
improve moderately through force reductions and through merger
synergies-albeit the latter at a lower level than experienced in 2001.Management is committed to delevering the balance sheet and the company has definitive sales agreements with respect to the sale of rural access lines in three states that are expected to generate approximately $2.6 billion in aftertax proceeds. Free cash flow levels are expected to be enhanced by a 2002 construction program that will run approximately $1.5 billion to $2.0 billion lower than in 2001. In addition, Verizon is not expected to offset the issuance of equity under certain equity plans with common stock repurchases Stock repurchase A firm's repurchase of outstanding shares of its common stock. in the open market as it had in the past. Finally, Fitch's expectations do not incorporate a return in 2002 of the company's $1.7 billion deposit associated with the NextWave auction. The Rating Outlook and ratings incorporate expectations that Verizon will act to maintain a credit profile consistent with a 'A+' rating at the parent level as it approaches potential events with respect to its investment agreement with Vodafone pertaining per·tain intr.v. per·tained, per·tain·ing, per·tains 1. To have reference; relate: evidence that pertains to the accident. 2. to Verizon Wireless Cellco Partnership, doing business as Verizon Wireless, owns and operates the second largest wireless telecommunications network in the United States, based on total wireless customers. and with the recapture recapture n. in income tax, the requirement that the taxpayer pay the amount of tax savings from past years due to accelerated depreciation or deferred capital gains upon sale of property. (See: income tax) RECAPTURE, war. of Genuity. The agreement with Vodafone could require Verizon or Verizon Wireless to purchase up to $20 billion of Vodafone's interest in Verizon Wireless between 2003 and 2007 at its then fair market value. The agreement could require a purchase of up to $10 billion in July 2003 or July 2004. At Verizon's option, this could be satisfied with the equity of either Verizon or Verizon Wireless. Amounts under the second phase of the put could require a cash component or assumption of debt of a minimum of $7.5 billion. With respect to the recapture of Genuity, which could occur under certain circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or and at Verizon's option, Verizon has recently commented that Genuity's operating losses operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. would have to be reduced in order for Verizon to recapture Genuity, assuming the appropriate conditions were met. At year-end 2001, Verizon had advanced $1.15 billion as part of an agreement to provide up to $2.0 billion in financing to Genuity, which represents about one-half of Genuity's outstanding debt. In 2002 and beyond, Verizon's EBITDA-to-interest coverage is expected to exceed 8.0 times (x), which is consistent with the company's 'A+' rating. However, 2002 debt-to-EBITDA is expected to approximate 2.0x, which is relatively weak for Verizon's financial and business risk profile. Fitch has placed significant weight to management's commitment to reduce leverage and in order to maintain a Stable Rating Outlook Fitch would expect Verizon to reduce leverage to approximately 1.9x or below in 2003.
Operating telephone company ratings affirmed include:
Company Security Rating
Verizon-Delaware Debentures 'AA'.
Verizon-Maryland Debentures 'AA'.
Verizon-New England Debentures/Notes/
Remarketed Sec. 'AA'.
Verizon-New York Debentures/Notes
Refund. Mtg Bnds 'AA'.
Verizon-New Jersey Debentures/Notes 'AA'.
Verizon-Pennsylvania Debentures/Notes 'AA'.
Verizon-Virginia Debentures/Notes 'AA'.
Verizon-Washington, D.C. Debentures 'AA'.
Verizon-West Virginia Debentures/Notes 'AA'.
Verizon-California Debentures/FMB 'AA'.
Verizon-Florida Debentures 'AA'.
Verizon-Hawaii First Mtg Bnds 'A'.
Debentures 'A-'.
Verizon-North Debentures/Telephone
Facility Lease Bonds/
First Mtg Bnds 'AA'.
Verizon-Northwest Debentures/FMB 'AA'.
Verizon-South Debentures/FMB 'AA'.
GTE Southwest Debentures/FMB 'AA'.
Verizon Network Funding Commercial Paper 'F1+'.
Other ratings affirmed:
GTE Corp. Debentures/Notes 'A+'.
NYNEX Corp. Debentures 'A+'.
Verizon Credit Corp. Notes 'A+'.
Verizon Finance Corp. Euro Notes 'A+'.
Cellco Partnership
(Verizon Wireless) Sr. Unsecured 'A'.
Ratings Downgraded
Verizon Global Funding Commercial Paper 'F1'.
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