BT crucial debt meeting postponed

Sir Iain Vallance and Sir Peter Bonfield: under pressure

British Telecom has won itself another month to tackle its debt mountain before it is threatened with a downgrade of its credit worthiness.

A meeting scheduled for April between the telecom giant and the international ratings agency Standard & Poor's has been postponed to May.

BT has said that the meeting had to be in May because of diary conflicts, and a spokesman said no date in May has yet been set.

A spokeswoman at S&P added "there was nothing sinister" in the postponement.

Crucial time

The meeting comes at a crucial time for BT, which is under S&P's "negative credit watch" for a downgrade on its credit rating.

BT's credit ratings
(S&P)

One year ago: AA+

August until present: A

Possible downgrade to: B++

This means that the company's current credit worthiness, graded "A", could slip down a notch to "B++" if S&P is not happy with BT's attempts to reduce its £30bn debt burden.

A cut in its rating would push up the company's borrowing costs and prove an embarrassing setback.

A year ago, the company's rating was "AA+". It was downgraded over a notch to "A" in August 2000.

The postponement by a month grants BT precious time to work on its debt-reduction programme.

No meetings

It also means the meeting will be closer to BT's full-year results announcement scheduled for 17 May.

The company spokesman said that there were no other meetings slated with other ratings agencies this month, though he said BT did regularly meet with the agencies.

Earlier this month, the company also cancelled a meeting with shareholders. This proved unpopular because shareholders wanted to know how BT planned to turn around its finances.

Debt-reduction measures

The company had hoped to float or demerge its BT Cellnet wireless phone division and its Yell yellow pages division, to help cut the debt burden.

But those hopes have been dashed by the continuing collapse in stock market valuations, meaning that BT would get a much lower price than it wanted if it tried to sell these divisions.

Alternatively, the board is said to be considering asking shareholders to buy a further £5bn worth of shares.

But the big institutional shareholders say they will only do this if the former state monopoly promises to shake up its management.

The company's chiefs - Sir Iain Vallance and Sir Peter Bonfield - have both come under pressure to step down.

Recently BT's shares hit three-year lows. On Friday, they were trading at a loss of almost 2.5% at 515.5p.