WorldCom and Revlon grapple for gains; Goodyear slammed on earnings, SEC investigation

By Carlise Newman

Chicago, Nov. 20 - WorldCom Inc. recovered after three straight days of losses from a weak monthly operating report late Monday.

WorldCom's 8¼% notes due 2011 were up 1½ points to 36 bid Thursday. The bonds had fallen a ½ point Monday ahead of the report and a ½ point on each of Tuesday and Wednesday.

WorldCom recorded $1.95 billion in revenue for September versus $2 billion in August 2003.

Operating income for September was $88 million, a decline of $50 million from August, primarily reflecting lower revenues. Sales, general and administrative expenses were flat month-over-month, including $47 million in August and $55 million in September for restatement and audit expenses.

Meanwhile Revlon Inc. bonds managed to eke out a small gain Thursday. Last Friday the company said that Ron Perelman's MacAndrews & Forbes Holdings Inc. has agreed to provide up to $125 million to the cosmetics company in 2004, to enable the company to continue to execute its plan.

Revlon's 8½% notes due 2006 were up ½ a point to 67 bid, 70 offered, according to a trader. On Friday, after the cash injection was announced, that issue added 2 points, and rose an additional point Monday before abandoning the rally and dropping ½ a point both Tuesday and Wednesday.

"They were all over the place today. The bonds opened at 66 bid, got up to 68, and then fell back to land at 67 before the close," a trader said. "It's not unusual. It just reflects the uncertainty."

Elsewhere, Goodyear Tire & Rubber Co. debt sagged after it said late Wednesday it had a loss of $105.9 million in the third quarter, and that the Securities and Exchange Commission has launched an informal inquiry into its restatement of earnings for the last 5½ years.

The Akron, Ohio, tire maker last month said it would have to restate earnings going back to 1998 because of errors in its internal billing system and the implementation of a new computerized accounting system. In a filing to the SEC late Wednesday, the company indicated the errors caused the company to overstate its earnings by $84.7 million during that period.

Goodyear's 7 7/8% notes due 2011 were seen dropping 4 points to 76 bid, 79 offered, one trader said. At another desk, they were seen at 77 bid, according to a trader. After the restatement announcement late last month, the bonds had dropped 3 points and were trading at the 81 bid level for the last few weeks.

"An investigation by the SEC is of course really bad news, but combine it with that rotten report and this is what you get," he said.

The company, as part of its filing to the SEC, said it had a loss of $105.9 million in the third quarter, or 60 cents a share, compared with a restated net income of $32.7 million, or 20 cents a share, a year earlier. Sales rose to $3.91 billion, compared with a restated $3.53 billion a year earlier.

Goodyear said its core North American operations were hurt by higher raw materials prices and weaker demand for some types of tires. The latest quarter includes a charge of $56 million, or 27 cents a share, to cover layoffs and other restructuring moves. The company also said it would take about $300 million in charges in the fourth quarter to close its plant in Huntsville, Ala., which employs about 1,100 workers, as well as to cut an additional 1,200 jobs elsewhere in North America and Europe.

Loral Space and Communications Inc.'s 10% notes due 2006 were down 1 point to 73½ bid. They dropped a total of 5 points this week.

Last month, the bonds were soaring after the U.S. Bankruptcy Court for the Southern District of New York authorized Loral subsidiary Space Systems/Loral to sell satellites to DirecTV Inc.

The court approved the construction of two satellites for DirecTV and one satellite for PanAmSat Corp. PanAmSat also has an option to order an in-orbit spare for one of its existing satellites from Loral.

The value of the three new awards is more than $320 million. DirecTV will make advance payments of $25 million on each of its two new satellite orders and PanAmSat will make an advance payment of $25 million on its new satellite order, for a combined cash advance of $75 million.

In other news, WestPoint Stevens Inc.'s 7 7/8% notes due 2008 were down 1 point to 12½ bid, a trader said. The bonds have been steadily dropping about a point per day since the company released weak third-quarter earnings last Friday. On Tuesday, the West Point, Ga.-based home furnishings manufacturer said it will lay off 300 people at its Lanier, Ala. plant as it moves production to plants that are better able to meet styles that are in demand.

"It was pretty slow today, just a lot of the same things to wrap up," said a trader.

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