August 10, 2010 / 9:37 PM / 9 years ago

S&P says may cut Verizon ratings as leverage high

NEW YORK, Aug 10 (Reuters) - Standard & Poor’s on Tuesday said it may cut Verizon Communications (VZ.N) ratings, noting the telecommunications company has a limited ability to reduce its debt and improve its earnings in order to reduce its leverage this year.

S&P currently rates Verizon A, the sixth highest investment-grade rating. Any downgrade would likely be limited to one notch, the credit ratings agency said.

Verizon’s leverage — a measure of debt relative to earnings before interest, taxes, depreciation and amortization — is currently around three times, which is high for its ratings, S&P said.

Leverage below two times is more appropriate for the A rating, which reflects modest financial profile, S&P added.

Verizon last month posted a quarterly loss due to a $2.3 billion charge for job cuts but wireless customer growth and landline profit margins impressed investors. For details, see [ID:nN2395698]

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