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March 7, 1994

CREDIT RATINGS

By CBR Staff Writer

BellSouth Corp has got away with it this time, but clouds still hang over it: Standard & Poor’s Corp says it affirmed the triple-A senior long-term debt issues of BellSouth Telecommunications Inc, BellSouth Capital Funding Corp, BellSouth Savings & Employee Stock Ownership Trust and BellSouth Savings & Security ESOP Trust – covering about $7,600m of outstanding long-term debt, but says the ratings outlook is negative. The affirmations result from a review of BellSouth’s strategic direction following the failure of QVC Network Inc’s bid for Paramount Communications Inc, which relieved BellSouth Corp of the obligation to invest $2,000m in QVC, but BellSouth’s participation in the bidding for Paramount, and the company’s apparent interest in investing in entertainment programming, indicate a willingness to assume risks that are significantly greater than those characteristic of BellSouth’s primary businesses, the ratings agency said, noting that it does have the capacity to offset incremental risks by funding new business ventures very conservatively; nevertheless the Atlanta Baby Bell’s evident interest in investing in areas in which the company would have a much weaker business position than it currently has in its core communications services operations may lead to a decline in creditworthiness over time, it concluded.

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