DUFF & PHELPS: GTE SOUTHWEST INC. $250 MILLION DEBENTURES DUE 1999 RATED 'A'; $250 MILLION DEBENTURES DUE 2005 RATED 'A'
CHICAGO, Dec. 6 /PRNewswire/ -- Duff & Phelps Credit Rating Co. has assigned a rating of "A" (Single-A) to GTE Southwest Inc.'s (GTE-SW) $250 million offering of debentures due Dec. 1, 1999, and $250 million debentures due Dec. 1, 2005. The debentures due in 1999 were priced at par to yield 5.82 percent and the debentures due in 2005 were priced at par to yield 6.54 percent. Proceeds will be used to refinance high-cost long-term debt. Aggressive reductions of interexchange access rates to forestall competitive inroads and the adoption of FAS 106 have resulted in a sharp decline in GTE-SW's income during 1993. The access rate cuts, while a necessary step in improving GTE-SW's competitive position, have put pressure on profitability. Positively, the net savings from this refinancing should total nearly $12 million annually and will result in an improvement in pretax interest coverages of roughly 90 basis points. Additionally, GTE-SW continues to maintain a very conservative capital structure, with debt making up a modest 41 percent of total capital. As it faces an increasingly competitive environment, GTE-SW will need to strengthen its quantitative protection measures over time to maintain its present level of credit quality. Approximately 30 percent of the company's lines are in areas surrounding Dallas that will attract significant competitive interest. However, GTE Southwest's averaged rates reflect the higher cost nature of the remaining 70 percent of its lines that are in more rural areas. Continued aggressive cost-cutting, revenues from new services, and savings from the planned refinancings will be necessary to improve profitability and strengthen creditworthiness in the face of expected ongoing reductions in toll and access rates. GTE-SW provides local telecommunications services to 1.55 million access lines in Texas (84 percent of total lines), Oklahoma (eight percent), Arkansas (five percent), and New Mexico (three percent). Major markets served include the suburban communities surrounding Dallas, Fort Worth, Austin, and Houston, Texas; Tulsa, Okla.; and Little Rock, Ark. -0- 12/6/93 /CONTACT: James J. Stork, CFA, of Duff & Phelps Credit Rating Co., 312-368-3125/ (GTE)
CO: GTE Southwest Inc. ST: IN: TLS SU: RTG
LG -- NY096 -- 0915 12/06/93 15:55 EST
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|Date:||Dec 6, 1993|
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