WorldCom lower; Sirius Satellite moves up on convertible announcement; Magellan Health up

By Carlise Newman

Chicago, May 20 - WorldCom Inc. again dominated trading in distressed debt Tuesday as the market digested news that it may pay the largest fine in history to the Securities and Exchange Commission.

On Monday a federal judge said he needed more details on WorldCom's proposed $500 million deal to settle charges with securities regulators that it engaged in one of the biggest accounting frauds in U.S. history and set another trial date for June 11.

WorldCom's bonds were seen dropping "about a point" to end the session at 28 bid/29 offered.

"We saw one trade today at 28 and yesterday they were around 28 7/8," said one distressed debt trader. "Not sure what the deal is. They've been very active in the last few weeks."

WorldCom's bank debt was seen bid at 27 and offered at 28, unchanged from Friday.

Under the framework for the proposed deal, WorldCom would pay a $500 million fine, with the money going to certain shareholders and bondholders who were victims of the alleged accounting fraud. WorldCom employees would not be eligible for that restitution.

WorldCom's fine was set at $1.51 billion, but will be satisfied by payment of $500 million since the No. 2 U.S. telephone and data services company is in bankruptcy.

The Securities and Exchange Commission had charged last June that the long-distance telephone and internet data company had manipulated its financial records at least as far back as 1999 to meet Wall Street expectations. WorldCom, which plans to change its name back to MCI, is expected to restate roughly $11 billion in earnings.

If the judge approves the deal, the penalty would represent the biggest fine ever assessed by the SEC against a public company that is not a broker-dealer. Xerox paid a $10 million fine last year to resolve its accounting problems.

Subscription radio broadcaster Sirius Satellite Radio Inc. said on Tuesday it will sell $125 million of convertible senior notes.

Sirius's 15% notes were seen rising "about three points" from Friday's levels to 60 bid/61.5 offered, while its 9 1/8% notes due 2007 were quoted up one point to 97 bid/99 offered from 96 bid/98 offered.

New York-based Sirius said the deal has an $18.75 million greenshoe. It said it would use sale proceeds for general corporate purposes. Bookrunner is Morgan Stanley.

"This was definitely good for them," said a trader.

Calpine Corp.'s 8% notes due 2011 were seen trading Tuesday at 68 bid, ending the session at 68 bid/69 offered, a half-point higher than Monday's levels of 67.5 bid/68.5 offered.

But those prices were three points lower than Friday, despite news that it had completed the $82 million monetization of an existing power sales agreement with the Bonneville Power Administration. The San Jose, Calif.-based energy company announced last week it would receive a $106 million payment from Aquila Corp. as part of a transaction involving a joint-venture Louisiana power plant that buys natural gas from Aquila and supplies it with saleable electricity.

"The energy names were quieter today than usual," said distressed debt trader. "Actually it was pretty quiet all around for the last two days, although we saw some action in Magellan Health."

He said Magellan Health Services Inc.'s 9% senior subordinated notes due 2008 were at 31½ bid/32¼ offered, up two points from Monday when they were seen at 28½ bid/30¼ offered. Magellan's revolver was seen bid at 92/offered at 93.75, unchanged from Monday.

The trader said he didn't know what caused the move in Magellan.

"There was no fresh news good or bad," he said.

Although it may not have affected the move in the company's bonds, Magellan said Tuesday it sold its NurseAccess line of business to IntelliCare Inc.

IntelliCare also purchased two NurseAccess call centers previously operated by Magellan. The Columbia, Md.-based behavioral health company will continue to offer services within the call centers under an outsource agreement with IntelliCare.

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