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Mix-Ansicht- Und hier die naechste 30 mrd.USD Pleite? - XERXES, 24.04.2002, 08:18
Und hier die naechste 30 mrd.USD Pleite?
WorldCom Debt Nears Distressed Level on Ratings Cut (Update1)
By Heather Landy
New York, April 23 (Bloomberg) -- WorldCom Inc. bonds neared distressed levels and its stock fell to the lowest in a decade after lower earnings estimates caused the long-distance carrier's credit rating to be cut two levels by Moody's Investors Service.
The downgrade to ``Baa2'' from ``A3'' follows yesterday's reduction by Standard & Poor's and leaves the sixth-biggest U.S. corporate bond issuer two levels from junk, or speculative grade.
WorldCom's bond yields rose to junk levels last month when the U.S. Securities and Exchange Commission started probing accounting methods and loans to Chief Executive Officer Bernard Ebbers and other managers. WorldCom slashed 2002 sales forecasts last week because of lower demand from business customers.
``Investors are telling you that the potential for default is rising,'' said Eric Rasmussen, who's been selling WorldCom bonds from the $5.5 billion portfolio he manages at Victory Capital Management. ``They need to get this SEC investigation resolved and need a recovery in the telecom business.''
WorldCom shares fell for a fourth day, dropping 60 cents to $3.41, after falling to as low as $3.22. The stock has declined 76 percent this year.
The company's 8.25 percent coupon bonds maturing in 2031 plunged to 58.75 cents on the dollar from 64 cents, traders said. That pushed up the yield to 14.2 percent from 13.1 percent for a spread to comparable Treasuries of 906 basis points.
Bonds trading at spreads of 1,000 basis points over Treasuries are considered distressed, according to Merrill Lynch & Co. A basis point is 0.01 of a percentage point.
`Potential for Default'
``They're way into junk yields,'' Rasmussen said. WorldCom has enough cash to meet its shorter-term obligations, he added.
Moody's ``does not believe WorldCom faces a significant liquidity challenges in 2002,'' the ratings firm said in its report. WorldCom has more than $2 billion of cash and $8 billion in unused bank lines and other loans.
Fitch Ratings, which cut WorldCom today, to ``BBB-,'' said WorldCom may not renew a $3.75 billion line of bank credit expiring in June. That would leave the company with $4.25 billion in reserve lines of credit from banks.
Standard & Poor's cut Clinton, Mississippi-based WorldCom yesterday to ``BBB,'' which is equivalent to ``Baa2'' at Moody's. The ratings will remain under review for another reduction and affect about $30 billion in debt, Moody's said in a statement. Lower-rated companies typically pay higher premiums to borrow in the bond market.
The investment-grade corporate-bond market was valued at about $1.87 trillion at the end of 2001, almost six times the size of the $324 billion junk-bond market, according to Lehman Brothers Holdings Inc. Many investment-grade bond managers are forbidden from investing in junk bonds.
Bond Maturities
WorldCom spokesman Brad Burns declined to comment on the ratings cut or the company's financing plans.
The company slashed its 2002 sales forecast by $1.6 billion, to $21 billion, and cut its capital spending budget for the year to $4.5 billion, down from a previous estimate of $5 billion to $5.5 billion.
``They need an improvement in business sooner rather than later, and it's a stretch to see that occurring in the near term,'' said Jim Shallcross, who holds WorldCom debt among the $5.5 billion he helps manage at Independence Investments LLC.
Only 2 percent of its outstanding bonds, or $60 million, matures this year, according to Bloomberg data. Another $2.6 billion will mature next year, followed by $2.5 billion in 2004.
A further cut by either ratings firm would set off a trigger in the company's accounts-receivable securitization program, Moody's said. If WorldCom falls below ``Baa2'' at Moody's or ``BBB'' at S&P, it must set aside a reserve for the program. If the ratings fall to junk, the program would be ended unless it can be amended, Moody's said.
The ratings firm also put WorldCom's ``P-2'' short-term debt rating on review for a possible downgrade.
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