WorldCom still buzzing; Mirant pipes down; Petroleum Geo Services slides further

By Carlise Newman

Chicago, July 30 - It was a relatively busy distressed debt trading session Wednesday, with WorldCom Inc. leading the way and monopolizing the market, as it has the last few days.

WorldCom was "buzzing but not in a good way," a trader said. The company has been facing opposition from its rivals, which have accused WorldCom of rerouting telephone calls through Canada as a way to avoid tariffs owed to other telecom companies for use of their networks.

The rerouting practice is said to have been going on for 10 years but the charges only surfaced in the last 10 weeks when a former WorldCom employee alerted the FBI about a company project known as "Canadian Gateway," according to various news reports, starting with one in The New York Times on Sunday.

The bonds opened at 27 bid, then fell a point to end the session at 26 bid, 27 offered, a trader said.

The bank debt was quoted at 27 bid, 29 offered, a two-point drop from Monday, another trader said.

"We saw it trade at about 28 late Tuesday, and it opened lower and fell further today," he added.

Rerouting calls through Canada allegedly allowed WorldCom to send them back into the U.S. on AT&T's network. Therefore AT&T would pay carrying charges that should have been paid by WorldCom.

A trader said Leap Wireless Inc. bonds were also active during the day.

"The zero coupon bonds were offered at 9 in the morning with no bid," he said. A "big chunk" of bonds traded up at 8 7/8 and later on at 91/4, he said, to close at 9 bid, 9¾ offered at the close.

Elsewhere, "Mirant was quiet for a change," a trader said. "The bonds seem to have steadied a bit."

Mirant America Generation's bonds have been in the 76 bid, 77 offered range and the Mirant Corp. issues traded in the 43 bid range, to close at 43½ bid, 45 offered, a trader said.

Mirant's 8.3% notes due 2011 were quoted at 80 bid, 81 offered, unchanged from Monday when they were last seen.

Meanwhile, Petroleum Geo-Services ASA, which filed for Chapter 11 protection Tuesday, was somewhat busy Wednesday.

"Finally. After all they've been through everyone was just waiting for the final shoe to drop," a trader said.

He said PGS's bonds ended Wednesday at 67½ bid, 69½ offered, four points lower than Monday and two points lower than Tuesday.

The Chapter 11 filing is to implement a debt restructuring already agreed with creditors. The goal is to cut PGS' total debt to $1.3 billion from $2.5 billion by a conversion of the existing bank and bond debt into new debt and a majority of PGS' post-restructuring equity.

Under the plan, creditors holding Petroleum Geo-Services' $2.140 billion of senior unsecured debt, comprising $680 million of bank debt and $1.460 billion of bond debt, would be entitled to select between two recovery packages. One consists of a senior unsecured term loan and represents 61% recovery; the other is a combination of unsecured notes and 91% of Petroleum Geo-Services' post-restructuring equity, which will be reduced to 61% after Petroleum Geo-Services shareholders acquire 30% of the total post-restructuring shares for $85 million. The second option represents 73% recovery.

Both recovery packages would be entitled to cash in excess of $50 million.

Holders of PGS Trust I's trust preferreds would be given 5% of PGS' post-restructuring equity.

Existing shareholders would be given 4% of Petroleum Geo-Services' post-restructuring equity and the right to acquire shares to reach a total of 34% of the equity.

The Oslo, Norway-based oil company intends for the restructuring to be completed before the year-end 2003, following court approval.

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