WorldCom settles with creditors; Conseco trades heavily on plan approval; Mirant weakens further

By Carlise Newman

Chicago, Sept. 9 - WorldCom Inc. nearly completely commanded distressed trading Tuesday after announcing a settlement with two groups of creditors, edging the company closer to emergence from bankruptcy. In addition, Conseco Inc. received court approval for its reorganization plan, plotting out the same fate for the bankrupt company.

WorldCom bonds, which traded as high as 33 bid, were up 2½ points to 32¼ offered by the end of the session, a trader said. Another source said the paper was up earlier, then back to unchanged around 311/2, and said the bonds were as high as 32½ during the day.

"A big move for WorldCom," one trader said. "Today was incredible, just crazy. There definitely wasn't a single desk that didn't have their hands in WorldCom."

WorldCom's MCI paper traded as high as 81 bid, and closed the session at 78½ bid, 79½ offered, up 2 points. Subsidiary Intermedia traded at 79½ bid, 80½ offered.

"We had both buyers and sellers today," one source said of WorldCom bonds.

A judge adjourned the first day of WorldCom's bankruptcy case hearing on Monday to allow the company and two groups opposing its reorganization plan to continue talks toward a settlement. The court set a deadline of midnight for the talks.

Reports emerged Tuesday morning that just after midnight Ashburn,Va.-based WorldCom reached an agreement with the creditor groups. Under the arrangement, holders of WorldCom senior debt - both bank debt and notes - which were to be repaid 36 cents per dollar for their claims, will now receive 52 cents on the dollar.

A second group that was also unhappy with the original plan will now be paid 44.5 cents on the dollar.

Other features of the plan include: holders of subsidiary MCI Communications Corp.'s senior debt will receive new notes at the rate of 80 cents on the dollar; Intermedia senior debtholders will receive 37.4 shares of new common stock for each $1,000 of the holder's claim or new notes at the rate of 93.5 cents on the dollar; and Intermedia unsecured claims holders will receive 16.64 shares of new common stock for each $1,000 of allowed claim and cash at 41.6 cents on the dollar.

"It would seem like today the only thing anyone did was WorldCom," a trader said. "It was chaotic."

Elsewhere, Conseco Inc. was "flying off the desks but it didn't affect the price much" a trader said.

The extended bonds were quoted at 82 bid, 84 offered and the unextended bonds were seen at 48 bid, 50 offered. Both were unchanged from Monday.

Late in the session Conseco obtained court approval for its reorganization plan, pushing the company closer to its emergence date (see story elsewhere in this issue).

"Conseco's been really climbing the last few days leading up to the court date. The word was that they'll get out (of bankruptcy) early and that's still floating around. I wouldn't be surprised to see the bonds lose some strength tomorrow though, with the anticipation gone," a trader said.

Conseco struggled to come up with a reorganization plan that all creditors would approve. In late August, the company filed its fifth plan, adding a settlement with holders of the Trust Originated Preferred Securities that cleared the way for court approval.

Upon emergence from bankruptcy, Carmel, Ind.-based Conseco will be solely an insurance company.

Bankrupt cable television provider Adelphia Communications Corp.'s 9 7/8% notes due 2007 were seen at 67 bid, 68 offered, down "about ½ point," a trader said.

Meanwhile, Mirant Corp.'s bonds slumped further Tuesday, weighted by news Monday that Pepco and the Federal Energy Regulatory Commission said Friday that they would block any efforts by Mirant to cancel an unprofitable power-supply contract through the bankruptcy court.

Mirant's 7.9% notes due 2009 were seen at 44 bid, 46 offered, 2 points lower than Monday, a trader said.

"The bonds opened a point lower, probably still on the FERC news, and then dropped another point by the end of the day," he said. "Energy hasn't been doing so hot lately."

FERC and Pepco asked the U.S. District Court for Northern Texas to ensure the court overseeing Mirant's bankruptcy does not let Atlanta-based Mirant out of its contractual obligations to Pepco, a unit of electric utility Pepco Holdings Inc.

The FERC-Pepco filing argues the Federal Power Act confers jurisdiction to FERC that takes priority over any ruling by a bankruptcy judge.

Lastly, one trader noted that Global Crossing was active Tuesday.

"Yesterday the Global Crossing 91/2s of 2009 were 4 bid, 4 3/8 offer. Today I saw 5 to 5 3/8. Not a bad percentage move," the source said.

(Paul A. Harris contributed to this report)

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