WorldCom remains the focus, bonds actively traded; Federal-Mogul weaker despite bid news

By Carlise Newman

Chicago, Aug. 27 - News on WorldCom Inc. has been coming from every direction this week, causing the bonds to jump around at different levels for two consecutive trading sessions.

On Tuesday, news was out that WorldCom is likely to keep to its scheduled emergence from bankruptcy protection. The bonds were higher at Wednesday's open at 29 bid, and ended the session at 29¾ bid, 30 offered, a trader said. He said it was a rise of "about 2 points."

Another desk pegged the bonds at 30 bid, 30½ offered by the session's end.

Also Tuesday, a court-appointed monitor urged the company to take 78 steps, including tight compensation limits for executives and a fully independent board, to avoid future scandals and pave the way for its exit from bankruptcy proceedings. WorldCom said its board unanimously accepted the recommendations.

"This is good for the company even before it's put to use. It shines up their reputation before getting out of bankruptcy," said one market source.

At the same time the plan was revealed, news came out that WorldCom would be charged with fraud by the Oklahoma attorney general. Attorney general Drew Edmondson charged WorldCom, its former chief executive Bernie Ebbers and five others with violating state securities laws by knowingly giving false information to investors. The charges were revealed on Wednesday.

The 15-count complaint in Oklahoma contends that the company and the former executives used deceptive measures to defraud investors, lied about the company's financial health and ran a business that operated as a fraud.

"The Oklahoma news didn't impact the bonds much. They bounced around a little today, but they ended higher than they were trading in the beginning of the week," a trader said.

Elsewhere Federal-Mogul Corp. bonds were flat to weaker even though the company said Citigroup Venture Capital Equity Partners LP has expressed an interest in making a $350 million equity investment in the company.

The 7½% notes due 2009 were seen at one desk down ½ point at 14¾ bid, while another desk said they were unchanged at 13¼ bid.

As a condition to proceeding with the investment, CVC has requested that Federal-Mogul agree to an exclusive 90-day negotiating period and reimburse it for fees and expenses.

Federal-Mogul said it has asked the U.S. Bankruptcy Court for the District of Delaware to approve the requests.

In other news, Conseco Inc.'s bonds were unchanged at the higher levels seen Tuesday, when a trader said they "continued to trade up," quoting the unextended bonds at 40 bid, 41 offered. He said the extended bonds were seen at 68 bid, 70 offered, "up slightly" and will "continue to grind upward as the listing date approaches."

The listing date is when the bonds will be exchanged for equity under the Carmel, Ind.-based company's reorganization plan.

HealthSouth Corp. was again seen on trading desks. The Birmingham, Ala.-based healthcare provider has been under intense scrutiny in recent days, as allegations of fraud mount.

The 7 5/8% notes due 2012, which had fallen 1 point Tuesday, were up ½ point Wednesday to 82 bid, 82½ offered. The 8½% notes due 2008 were quoted at 84 bid, also up ½ point.

In other news, Doman Industries 8¾% notes due 2004 were up ½ point to 17½ bid. Doman is a bankrupt Canadian forest products company.

And Loral Space & Communications Inc.'s 10% notes due 2006 were down 1 point to 76 bid. The New York satellite operator has been in talks with IntelSat Ltd. and Echostar Communications Corp., separately, about a possible sale of the company.

"Aside from WorldCom, the last couple of days have been really quiet, just bits and pieces here and there. I'm sure a lot of people are starting their weekends early Friday and maybe even tomorrow, so it'll be worse," a trader said.

(Paul Deckelman contributed to this report)

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