NEW YORK (CNN/Money) - Moody's Investors Service downgraded Qwest Communications International Inc.'s credit ratings to "junk" status Thursday, saying the company is suffering from slowing growth, weak liquidity and uncertainties over asset sales.

The downgrade affects $26.4 billion of Qwest's outstanding debt and follows a similar action by Standard & Poor's on May 22.

Moody's cut its senior debt rating for Qwest Communications (Q: down $0.03 to $5.03, Research, Estimates) and its wholly guaranteed Qwest Capital Funding unit two notches to Ba2, its second-highest junk grade, from Baa3, its lowest investment grade rating.

At the same time, Moody's cut the senior debt of Qwest's regulated Qwest Corp. unit, which contains its local phone-service operations, one notch, to Baa3 from Baa2.

The rating agency cited concerns about Qwest's slowing growth, high debt load and "weak and still unresolved liquidity situation" among the reasons for the downgrade.

Moody's also said its is worried about the "material cash drain" at Qwest's long-distance unit, uncertainties over a Securities and Exchange Commission accounting probe, the timing of asset sales, and management credibility.

Qwest, the No. 4 U.S. local phone company, is one of three big U.S. phone operators to have its credit ratings cut by Moody's and other rating agencies this month.

WorldCom Inc. (WCOM: down $0.06 to $1.71, Research, Estimates), the No. 2 long-distance phone company, was cut to junk status May 10. AT&T Corp. (T: down $0.02 to $11.99, Research, Estimates), the nation's No. 1 long-distance service provider, was cut by Moody's on Wednesday to within two notches of junk status.

Qwest said it was disappointed by the Moody's downgrade, which the company said will have no substantial impact on its operations given its debt structure.

In a statement, Qwest Chief Financial Officer Robin R. Szeliga said the company is "concerned that today's adjustment by Moody's, as with S&P, is not based on any new information."

The company also highlighted its local service operations, which it said has stable cash flows and contribute nearly 80 percent of revenue and more than 90 percent of adjusted earnings before interest, taxes depreciation and amortization.

Qwest also said that the downgrade should not result in a default of its syndicated credit facility or any other indentures and reiterated its forecast to be cash flow positive in the second quarter and for the remainder of 2002.

The company also said it continues to make progress in its efforts to reduce its debt, including the sale of some of its non-strategic assets.  

-- from staff and wire reports