Qwest had $26.5 billion of debt as of March 31, according to S&P.
"Continued weakness in the overall economy and ongoing competitive threats are expected to pressure both the near-term and longer-term financial and operating performance of Qwest," says S&P analyst Catherine Cosentino in a statement. "Certain key external factors could constrain the company's ability to restore investor confidence and reestablish management credibility, including a series of pending shareholder lawsuits and an (Securities and Exchange Commission) investigation of several accounting practices."
Qwest is trying to sell its QwestDex Yellow Pages business. S&P said the new rating assumes Qwest can raise $8 billion in gross proceeds from a sale.