WorldCom slides slightly on revenue news; Grupo Iusacell slips on news Azteca won't back debt

By Carlise Newman

Chicago, June 17 - WorldCom Inc., already sinking on new accounting worries from last week, slipped further Tuesday after the company said its revenue declined in April - although operating revenue rose from the previous month.

WorldCom said revenue in April totaled $2.05 billion, down 2.4% from $2.1 billion in March. Operating income rose 36% to $114 million from $84 million.

WorldCom ended April with $3.7 billion in cash on hand, an increase of approximately $400 million from the beginning of the month.

WorldCom Inc.'s 7½% notes due 2011 were down a point Monday to land at 26¼ bid, 27¼ offered, a trader said. The bonds had been trading around 32 bid last week.

"They've taken a dive, but it's not so bad. They were starting to look a little better recently. They just have to get through this investigation stuff," a distressed debt trader said.

The Ashburn, Va.-based company has said it expects to emerge from bankruptcy this fall.

WorldCom said its reorganization costs rose to $117 million in April from $48 million in March. These costs, which fluctuate monthly, were due to expenses for international lease rejections, severance and professional fees.

"While the environment continues to be challenging, we are making clear progress in reducing our costs and rebuilding our business," said chief financial officer Bob Blakely in a news release. "We are profitable, and cash flow remains strong."

Last week, two investigative reports filed with the bankruptcy court revealed more details about the company's accounting scandal. In the wake of the reports, WorldCom's treasurer Susan Mayer and general counsel Michael Salsbury resigned.

The reports concluded that WorldCom had relaxed internal controls, limited oversight by its board, and a corporate culture in which former chief executive Bernie Ebbers and former chief financial officer Scott Sullivan ran the company without fear of reprisal.

In addition, a memo made available on Friday said the U.S. government should consider suspending business with WorldCom because of its financial fraud case, the Wall Street Journal first reported Friday. The assistant inspector general at General Services Administration, which handles government procurement, based his recommendation on civil fraud charges against the company.

WorldCom plans to change its name to MCI when it emerges from bankruptcy protection this fall.

"Aside from WorldCom, it was another day of odd-lot trading," a distressed trader said. As an example, he said Polaroid Corp. bonds were "up a little," quoting the 11½% notes due 2006 at 10½ bid, 10 5/8 offered.

Another trader agreed. "It's been like this for a few days. One big name crosses the desks for days in a row, and the rest of trading is just off-the-run stuff."

Such as Grupo Iusacell Inc., whose 14¼% notes due 2006 were quoted down two points to 24 bid. The Mexico City-based wireless company's 10% notes due 2004 were down two points as well to 50 bid, a trader said.

The bonds were down on news that assets from TV Azteca and other companies owned by Mexican magnate Ricardo Salinas will not be used to guarantee debt from struggling Iusacell. Salinas announced Friday he was buying No. 3 Mexican cellphone company Iusacell for $10 million in cash and the assumption of more than $800 million in debt.

Elsewhere, Adelphia Communications Corp.'s 9 7/8 % notes due 2007 were quoted "up a couple" at 58½ bid, 59½ offered. Another desk had the bonds bid at 593/4, up two points.

Conseco Inc.'s 8¾% notes due 2004 were seen at 30 bid, 31 offered Tuesday. On Friday, Conseco said it reached an agreement in principle with some dissenting creditors, who will amend their votes to support the plan.

Following the negotiations with the creditors, the Carmel, Ind.-based insurer said it intends to file an amended plan and now believes that there will be sufficient votes for all classes to accept the plan, other than the trust originated preferred securities, who continue to object.

Global Crossing Ltd.'s bonds were higher Tuesday, and traders attributed it to "heightened optimism" after a press release emerged last Thursday stating that XO Communications Inc. is prepared to launch a tender offer for any and all of Global Crossing Ltd.'s $2.25 billion bank debt. The tender offer would be priced at $210 per $1,000 of bank debt, or $472.5 million in total.

Global Crossing's bonds were quoted at 5.5 bid, 6.5 offered, a trader said, adding that he had "last seem them around 4 bid or so."

Global Crossing's bank debt traded at 21.5 Tuesday, a trader said

The single condition necessary for the tender offer to go ahead is the termination of the agreement for Florham Park, N.J.-based Global Crossing to be acquired by Singapore Technologies Telemedia Pte. Ltd., according to the news release.

Because various Global Crossing creditors have questioned the value of XO's recent purchase offer comprised of cash and securities valued at $700 million, XO also said it is now prepared, as an alternative, to offer $700 million in cash to acquire all of the assets of Global Crossing as a "Stalking Horse" bidder in a Section 363 sale, the release said. This alternative offer will be subject to higher and better offers from third parties through a Bankruptcy Court administered auction process.

In other news, Fleming Cos. Inc.'s bank debt traded at 85. Last week, the Dallas food distributor announced initiatives to strengthen its business that included selling some businesses.

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