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AT&T mulls asset sale
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November 8, 2000: 4:39 p.m. ET
Telecom may sell non-strategic holdings to cut debt, appease ratings firms
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NEW YORK (CNNfn) - AT&T Corp. is considering selling certain non-strategic assets, including possibly its 25.5 percent stake in Time Warner Entertainment, to help reduce a massive $62 billion debt load that is beginning to trouble credit rating agencies.
While declining to reveal specifics, company officials discussed the plans publicly for the first time Wednesday while promising to act on attractive opportunities as soon as possible.
"I don't think any company should keep nonstrategic assets and we will be monetizing those assets to pay down debt," AT&T Chairman Michael Armstrong said Wednesday following a breakfast with the Northeastern University CEO Breakfast Forum.
Some movement could be seen in "months, not years," Armstrong said.
 Any divestiture plans likely will be tied to AT&T's decision on how to meet the conditions placed on its $44 billion acquisition of cable television company MediaOne Group Inc., analysts said.
Analysts said one obvious divestiture could be AT&T's 25.5 percent stake in Time Warner Entertainment, a partnership with CNNfn.com parent Time Warner (TWX: Research, Estimates).
Drake Johnstone, an analyst who follows AT&T for Davenport & Co., agreed with an estimate in Wednesday's Wall Street Journal that the sale of the stake could bring about $12 billion, but it has been reported AT&T believes its stake is worth about $20 billion.
Johnstone said the company has to consider these measures because of falling revenue in its consumer long-distance business and a reluctance to saddle its new entities with too much debt after the company splits into four separately traded companies.
"They want to preserve a good credit rating, they want to be refinance at a reasonable rate and they want the entities to have access to additional capital," Johnstone said. "I think it's a good move for the long term."
Standard & Poor's credit rating service lowered its rating Monday on AT&T (T: Research, Estimates) to A from AA-, keeping it on watch for a possible downgrade, while Moody's Investors Service also has the telecom company on watch for a downgrade.
In their report, S&P telecom analysts Rosemarie Kalinowski and Nick Riccio said, "The ratings reflect Standard & Poor's expectation that the company will significantly deleverage its balance sheet near term, resulting in a stronger financial profile that will somewhat offset its riskier profile."
"However, if certain debt-reduction events do not occur in the near term as expected, it is likely that AT&T's ratings will be further downgraded prior to the breakup," the analysts said.
AT&T Spokesman David Caouette said Wednesday the company will continue to work closely with S&P to clarify its plans, but did not address any specific course of action.
There were rumors in early October that Time Warner was interested in acquiring AT&T's 25.5 percent stake in Time Warner Entertainment because it was jeopardizing the merger with American Online (AOL: Research, Estimates) due to regulatory concerns.
But on Oct. 10, AT&T sent a letter to the Federal Communications Commission saying it is unlikely to divest the stake "in the absence of a negotiated settlement between the parties, which appears unlikely."
Johnstone also said AT&T could also shed its 30 percent stake in Cablevision Systems Corp. (CVC: Research, Estimates), or its small stake in British wireless firm Vodafone Group PLC.
Shares of AT&T fell 44 cents to $22 on the New York Stock Exchange.
-- from staff and wire reports 
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