Fitch downgrades AT&T after spectrum auction, coronavirus impact

Fitch Ratings downgraded the long-term issuer default ratings of AT&T Inc. and its subsidiaries to BBB+ from A-, while also downgrading the U.S. carrier's short-term issuer default rating and commercial paper rating to F2 from F1.

The downgrade reflects the rating agency's expectations of sustained leverage for AT&T, following its spending in the recently held C-band spectrum auction, the near-term business impact of the coronavirus pandemic, and "secular pressures" on its video business.

The outlook on AT&T is stable, considering the company's commitment to reduce debt in the near term using free cash flow after dividends and proceeds from asset sales.

The rating agency also downgraded DIRECTV Holdings LLC's long-term issuer credit rating to BBB+ from A-, with the rating placed on Rating Watch negative. The latter reflects the assumption of debt by the new DIRECTV, to be created post completion of AT&T's transaction with TPG Capital LP. The new entity will own and operate the carrier's U.S. video business unit, consisting of the DIRECTV, AT&T TV and U-verse video services.

Fitch Ratings expects the new DIRECTV to have an issuer default rating lower than AT&T.

S&P Global Ratings earlier revised its outlook on AT&T to negative from stable over the impact of spending in the spectrum auction, while placing DIRECTV's ratings on CreditWatch negative in line with the AT&T-TPG deal.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.