Global Crossing slides on weak earnings; WorldCom on road to recovery

By Carlise Newman

Chicago, Aug. 5 - Global Crossing Ltd. bonds crumpled Tuesday after the company released bleak earnings after the bell Monday, saying its net loss for June expanded from May.

The bankrupt network operator cited higher professional fees and one-time restructuring costs as offsetting slightly higher revenues.

In June, the company had a net loss of $99 million on revenue of $252 million. Global Crossing in May posted a loss of $86 million on revenues $247 million.

Global Crossing's bonds lost the ½ point they had gained on Monday, and were back trading in the 3 bid, 4 offered range, traders said.

"Before all of this is over, I wouldn't be surprised to see them close to a penny," a trader said, referring to the opposition the company is facing from the government on its pending sale to Singapore Technologies Telemedia.

Global Crossing said it had $559 million in cash as of June 30, including $222 million in unrestricted cash and $337 million in restricted cash.

Meanwhile WorldCom Inc.'s bonds have been improving after an initial review of the company revealed that there was no evidence of improperly routed phone calls.

Last week, AT&T Corp. accused WorldCom of improperly diverting U.S. calls, including those by government agencies, to Canada to avoid connection fees. On Monday, the initial review did not find evidence, WorldCom said.

The bonds rose "about a point and a half" to 27½ bid, 28 offered, a trader said.

MCI bonds were up a point to 72½ bid, 73½ offered.

Negative news last week weighed on the bonds Thursday and Friday. On Thursday the General Services Administration said the bankrupt telephone company could no longer compete for new U.S. government contracts after finding it lacked proper internal controls and business ethics.

The GSA said it would review whether the temporary ban on WorldCom should be extended for up to three years.

The GSA agency said its investigation found the Ashburn, Va.-based company had not adequately addressed its material accounting and business ethics weaknesses.

WorldCom said the decision does not affect its existing government contracts, which draw in about $1 billion in revenue annually. The company has 30 days to respond to GSA, though it can ask for an extension.

Elsewhere, Mirant Corp. bonds, which have been steadily climbing in the last few weeks, rallied on rumors in the markets that billionaire investor Carl Icahn may be making a bid for the energy company, which is now in bankruptcy proceedings.

Mirant's 8.3% notes due 2011 were quoted at 82 bid, 83 offered, two points higher than when they were last seen mid-week last week.

"The MIR bonds were dormant later in the week (last week). Then they picked up again today, after the Icahn rumors started up," a trader said.

Atlanta-based Mirant filed for bankruptcy protection on July 14.

Meanwhile, Hollywood Casino Shreveport continued its recovery from Friday, when the bonds dropped 7 points after news that it did not make the Aug. 1 interest payments of $12.3 million due on the 13% notes due 2006 and the 13% first mortgage notes due 2006 issued by Hollywood Casino Shreveport and Shreveport Capital Corp.

The 13% notes due 2006 rose to 58½ bid, 60 offered, "about a point" higher than Monday, a trader said.

Hollywood Casino Shreveport is already in default on the notes after receiving a notice on March 14 from a representative of holders of both series of notes that it had failed to make repurchase offers as required by the note indenture.

Hollywood Casino Shreveport is in negotiations with noteholders about a possible restructuring or other resolution.

In other news, HealthSouth Corp.'s 7 5/8% notes due 2012 were seen down ½ point at 81½ bid, 81 offered, a trader said. The Birmingham, Ala.-based hospital operator is in bankruptcy proceedings, and its former executives have been testifying on fraud charges in court the past few months.

Houston-based Enron Corp.'s 6 7/8% notes due 2007 and 6.95% notes due 2028 were both at seen at 17 7/8 bid, a trader said.

Earlier in the session, Adelphia Communications Corp.'s 9 7/8% notes due 2007 were quoted up 1 point at 65 bid. Adelphia has been actively traded in recent sessions and has slowly climbed upward.

(Paul Deckelman contributed to this story.)

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