WorldCom heads higher on revised financial expectations for 2003 through 2005

By Carlise Newman and Sara Rosenberg

New York, Aug. 11 - WorldCom Inc.'s bonds rose by a point to 28 bid, 29 offered on Monday as the company filed revised projected earnings before EBITDA for 2003 to 2005 with the Securities and Exchange Commission.

On July 31, the United States General Services Administration announced the proposed debarment of WorldCom from participation in federal procurement and non-procurement programs due to weaknesses in the company's accounting controls and the need to improve and enhance their newly established ethics office. As a result, until these concerns are remedied, WorldCom is ineligible to be awarded new contracts with the federal government or new subcontracts with government contractors, and existing contracts will not be renewed or otherwise extended.

The financial impact of this action depends largely on the length of time that the Ashburn, Va. telecommunications company remains on the excluded parties list, according to the SEC filing.

Assuming recertification as of Nov. 1, 2003 net income is now projected to be $0.527 billion in 2003, $1.057 billion in 2004 and $1.179 billion in 2005, cash flow from operating activities is now projected to be $3.272 billion in 2003, $2.872 billion in 2004 and $3.219 billion in 2005, and EBITDA is now projected to be $2.667 billion in 2003, $3.672 billion in 2004 and $4.059 billion in 2005.

Originally, the estimated negative impact on net income, cash flow from operating activities and EBITDA was projected at $8 million in 2003, $18 million in 2004 and $12 million in 2005.

Assuming recertification as of July 1, 2004, net income is now projected to be $0.527 billion in 2003, $0.970 billion in 2004 and $1.054 billion in 2005, cash flow from operating activities is now projected to be $3.272 billion in 2003, $2.783 billion in 2004 and $3.088 billion in 2005, and EBITDA is now projected to be $2.667 billion in 2003, $3.583 billion in 2004 and $3.928 billion in 2005, the filing said.

Originally, the estimated negative impact on projected net income was expected to be $8 million in 2003, $105 million in 2004 and $137 million in 2005, the estimated negative impact on projected cash flow from operating activities was expected to be $8 million in 2003, $107 million in 2004 and $143 million in 2005, and the estimated negative impact on projected EBITDA was expected to be $8 million in 2003, $107 million in 2004 and $143 million in 2005.

On Aug. 6, WorldCom won approval from the judge overseeing its bankruptcy case for a settlement of civil fraud charges, which had been brought against the telecom operator by the Securities and Exchange Commission. The parent of MCI, the Number-2 U.S. long-distance carrier, agreed to pay $500 million in cash and $250 million in stock to settle the charges.

The settlement is seen as a key development in WorldCom's efforts to emerge from Chapter 11 this fall - although recently unearthed charges by rivals such as AT&T alleging that WorldCom rerouted calls through Canada and through smaller phone companies onto AT&T's system so that the latter would allegedly get stuck with millions of dollars of phone access charges rightfully attributable to WorldCom have emerged as possible roadblocks.

Based on a preliminary internal review WorldCom said it believes that there is no evidence of improperly routed phone calls. The Enforcement Bureau of the FCC has also initiated an investigation into these rerouting allegations. "WorldCom is promptly acting to provide the FCC the information requested. The debtors believe that upon a review of the information relating to these practices, the FCC will similarly conclude that the allegations are baseless," the SEC filing said.

Global Crossing Ltd.'s bonds steadied on Monday, a nice change after last week's rollercoaster ride attributed to bleak earnings news. The paper was quoted at three bid, four offered, according to a trader.

"The bonds held in at about three bid. There were a couple of trades in the 3½ range and then it fell back to opening levels," the trader said.

After market hours last Monday, the Madison, N.J. network operator announced a net loss for June of $99 million compared to the reported net loss of $86 million in May. The company cited higher professional fees and one-time restructuring costs as offsetting slightly higher revenues.

Amerco Inc.'s bonds were quoted at 77 bid on Monday, about 1½ points lower than Friday's level, according to a trader.

On Friday, the bankrupt U-Haul parent company announced that chief financial officer Andrew Stevens - who had only hitched up with the trailer rental company about four months ago - was leaving to pursue other interests.

Furthermore, Amerco, which filed for Chapter 11 protection from its junk bond holders and other creditors, reiterated its intention to repay its creditors in full, without diluting the interests of its shareholders.

Calpine Construction Finance Co.'s new second priority secured floating rate notes due 2011 were seen higher by about two points from Friday's levels, which were cited at 98.25 bid, 98.75 offered.

"Calpine was active Friday but things have settled down today," a trader said. "It's Monday so we'll see what's going on tomorrow."

The San Jose, Calif. power company's new $365 million of debt priced late Thursday at 98.01.

Conseco Inc.'s bonds were unchanged from Friday with the extended bonds quoted at 66 bid and the unextended bonds quoted at 37½ bid, according to a trader.

The company, who's unsecured creditors finally came to an agreement on a reorganization plan about a week ago, plans to file a fifth amended plan that will reflect a $3.8 billion company value.

Conseco is a Carmel, Ind. holding company for two operating businesses, insurance and finance.

Lastly, Mirant Corp.'s 8.3% notes due 2011 were quoted at 85 bid, 87 offered, about two points higher than where they were trading late last week, according to a trader.

"The paper picked up Friday and kept zooming ahead today," the trader said regarding the Atlanta energy company's debt.

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