Fitch may upgrade AT&T

Fitch Ratings said it placed the A+ senior unsecured debt rating of SBC Communications Inc. on Rating Watch negative and placed the BB+ senior unsecured debt rating of AT&T Corp. on Rating Watch positive following the announcement of SBC's proposed acquisition of AT&T for about $15 billion in SBC common stock and the assumption of about $6 billion of net debt.

Including a $1 billion special dividend to be paid to AT&T shareholders at the close of the transaction, the total value of the transaction is about $22 billion.

The Rating Watch negative also applies to the existing long-term debt of various SBC subsidiaries that no longer issue debt, as financing activities have been consolidated at the SBC Communications level.

Fitch said the rating action reflects Fitch's concern regarding the prospects for the moderately higher business risk profile of SBC following the acquisition of AT&T. The transaction is not expected to have a material impact on SBC's credit metrics, given AT&T's low leverage for its current assigned rating.

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