WorldCom the focus ahead of plan confirmation; Owens Corning slides as bankruptcy case halted

By Carlise Newman

Chicago, Oct. 31 - WorldCom Inc. was the center of attention Friday as markets waited with bated breath to see whether the company's confirmation plan would be approved - and after the close, it was.

Most were in agreement that it would be approved, and the company's bonds reflected the confidence.

WorldCom filed an amended plan Oct. 22, under which general unsecured claims were divided into two sub-classes: MCI pre-merger claims and ad hoc MCI trade claims represented by the committee. Holders of WorldCom general unsecured claims are deemed to have rejected the plan and are not entitled to vote.

WorldCom Inc. was quoted 2 points higher Friday at 38 bid, 39 offered, according to a trader. The bonds have risen a total of 10 points this week, and were up 2 points Thursday, he said.

"We traded a ton of WorldCom today. Everyone is just pretty optimistic that the plan will go through and they'll be out of bankruptcy," the trader told Prospect News ahead of the announcement of the confirmation.

Other details of the plan include: holders of WorldCom senior debt - both bank debt and notes - may choose to receive 14.36 shares of new common stock for each $1,000 of the holder's allowed claim, or new notes at the rate of 35.9 cents on the dollar.

Unsecured claim holders will receive 7.2 shares of new common stock for each $1,000 of the holder's allowed claim and cash at the rate of 17.9 cents on the dollar. Holders of WorldCom's subordinated claims and equity interests will receive nothing.

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. 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.

In total, WorldCom will issue between $4.5 billion and $5.5 billion of new notes.

In other news Owens Corning paper was sharply lower on news reports that its bankruptcy case had been halted.

One source had the paper of Owens Corning "down about three to four points across the board," around 44 bid, 45 offered.

The move comes in response to a recent request by two holders of Owens Corning bank debt to have U.S. District Court Judge Alfred Wolin removed from the case, the news reports said.

Kensington International Ltd. and Springfield Associates LLC, two funds associated with New York distressed debt investor Elliott Associates that together hold $275 million in Owens Corning debt, claim Judge Wolin has a conflict of interest.

The funds alleged that Wolin hired two consultants to help with five asbestos cases, including the Owens Corning case, who have a conflict of interest because they also represent a class of asbestos plaintiffs in the G-I Holdings Inc. bankruptcy case, according to the reports.

The company's committee of unsecured creditors also asked the court to appoint a trustee on Thursday.

"This case is at a crucial phase, poised to plunge into a fruitless and protracted 'plan process.' The commercial creditors have lost faith both in this plan process and in the ability of this debtor to lead the way out of bankruptcy. A dramatic change is required to get this case back on track," said the committee in its court filing.

Elsewhere, Denny's Corp. bonds rebounded after posting a wide loss earlier in the week.

The 11¼% notes due 2008 bounced back from a drop on Wednesday and firmed to 58½ bid from 55 bid, according to a trader.

"It was a pretty impressive rebound," he said.

The notes had been at 56¾ bid Tuesday before the announcement.

For the third quarter, Denny's reported a net loss of $6.3 million, or $0.15 per share, compared with last year's third quarter net income of $56.1 million, or $1.39 per share

Denny's reported total operating revenue of $238.4 million for the third quarter, down $8.5 million from the prior year quarter. Company restaurant sales declined $7.9 million to $215.6 million, due primarily to 15 fewer company units. Franchise revenue decreased $0.5 million to $22.8 million, resulting from 25 fewer franchised and licensed restaurants.

Loral Space & Communications Inc. was "firming nicely," one trader said, with its 10% notes due 2006 up 2 points at 77 bid. The bonds have been higher all week, rising a point or so each day.

A U.S. bankruptcy court approved Intelsat's proposed $1.1 billion purchase of certain assets of bankrupt satellite maker and operator Loral on Friday last week.

Revlon Inc. paper slid Friday on continuing reaction to the company's wider third-quarter loss reported Thursday.

Revlon's 9% notes due 2006 fell to 66½ bid from 68 bid on Thursday, according to a trader. The notes fell 3 points Thursday after the report.

"These earnings sometimes have a lasting effect. But there are believers in this company out there," one trader said.

New York-based Revlon said Thursday its loss widened to $54.7 million, or 78 cents per share, in the third quarter, from a loss of $22.1 million, or 41 cents a share, a year earlier, when it received prepayment of certain licensing royalties.

Revlon also said it has almost exhausted several lines of credit, though Chief Executive Officer Jack Stahl said he expected the company would have access to funds it would need for its growth plan.

Reaffirming the company's liquidity, Stahl said in a news release he was "confident Revlon will continue to have access to the resources we need to execute our growth plan."

The company said that as of Oct. 29, it had used $248 million under its $250 million bank credit agreement, all of a $100 million MacAndrews & Forbes term loan, and $20 million of the $65 million MacAndrews & Forbes line of credit.

Meanwhile, Fleming Cos. Inc.'s 10 1/8% notes due 2008 firmed to 16½ from 15 previously.

A trader noted that the bonds are "not worth much, but it's a big percentage move." The bonds had traded as high as 17½ bid during the session.

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