AT&T; Revising $8-Billion Credit Line

AT&T; Corp., after a credit downgrade by Moody’s Investors Service, said it’s renegotiating an $8-billion credit line that would otherwise prevent the company from selling its cable business to Comcast Corp.

The largest U.S. long-distance telephone company’s loan agreement requires AT&T; to maintain a credit rating of at least Baa1 from Moody’s to move ahead with the Comcast transaction, AT&T; said in a filing Monday with the Securities and Exchange Commission. Moody’s last week cut AT&T; debt to Baa2, one level lower.

Eileen Connolly, an AT&T; spokeswoman, said the company hasn’t made any borrowings from the lenders in question and could therefore cancel the credit line to move ahead with the Comcast sale. She also said AT&T; would have had to obtain a new credit line anyway because the present financing commitment expires in December, around the time the Comcast sale is slated for completion.

“That is when we would be renegotiating the line of credit anyway,” Connolly said.

The company disclosed the terms of the credit line in a filing for its plan to sell 200 million common shares to help finance the purchase of the 69% of AT&T; Canada Inc. that AT&T; doesn’t already own. In 1999, AT&T; agreed to acquire the Canadian affiliate by June of next year.

The New York-based company is negotiating substitute financing with a group of lenders, some of whom are affiliated with the investment banks chosen to underwrite the sale of $2.25 billion of AT&T; shares.

The current bank financing expires in December.

The underwriters for the stock sale include Credit Suisse First Boston; Goldman Sachs & Co.; J.P. Morgan Chase & Co.; and Salomon Smith Barney Inc. The SEC filing didn’t specify which investment banks have affiliates negotiating to provide bank financing to AT&T.;

The credit line, as amended last December, includes banks such as Citibank, an affiliate of Salomon Smith Barney, Credit Suisse First Boston, Deutsche Banc Alex. Brown Inc. and Goldman Sachs Credit Partners, according to a copy of the loan agreement filed with the SEC.

The loan documents stipulate that AT&T; will not effect “a separation transaction” unless the ratings for its long-term debt are at least BBB-plus by Standard & Poor’s and Baa1 by Moody’s. The sale of AT&T;’s cable assets is included in the document’s definition of a separation transaction.

AT&T; is selling its cable business to Comcast in a transaction worth $57.8 billion. AT&T; shares rose 12 cents to close at $12.09 on the New York Stock Exchange.