WorldCom gains on likelihood of bankruptcy emergence; AmericCredit up on results

By Paul Deckelman and Paul A. Harris

New York, Aug. 26 - WorldCom Inc. bonds and those of its MCI long distance unit pushed higher Tuesday, after an article in The Wall Street Journal indicated that the troubled telecommunications company was likely to emerge from Chapter 11 on schedule, despite recent allegations that it had improperly switched calls onto the networks of rival carriers or had diverted them through Canada in order to avoid paying phone access charges. Also on the upside, AmeriCredit Corp. bonds and shares rose on better than expected fiscal fourth-quarter results.

Other selected names were mostly higher, although the overall market was said to have been quiet, with many players off on vacation in this last week of August. Financial markets generally saw a little excitement early in the session on market buzz that Fed Chairman Alan Greenspan had died, but as the day wore on, it became apparent to all that - to paraphrase Mark Twain - rumors of the Fed boss's death had been greatly exaggerated.

As the run-up to Labor Day continued Tuesday the news dynamics of the new issue market underwent a reversal: for a change syndicate sources had a minute to spend on the telephone, but they had nothing to talk about.

"...And it you think THIS is dead wait until Thursday and Friday," advised one source who added that no news is anticipated until the market gets under way after the three-day Labor Day recess.

However names and timing did emerge Tuesday on DRS Technologies' $350 million of new debt financing to help fund its acquisition of Integrated Defense Technologies Inc. Lead banks are Bear Stearns & Co. and Wachovia Securities, Inc.

The company previously told Prospect News that it expects to bring the financing in at a blended interest rate of 5½%, with the term loan expected to get done at 4½% to 5% and the bonds at 7½% to 8%.

Both the notes and the loan are expected to come into the market during the first two weeks of September, according to a capital markets source.

In addition, it appeared Pharma Services Holding, Inc.'s $450 million offering of 10-year senior subordinated notes to help fund the leveraged buyout of Quintiles Transnational Corp. is closer to materializing after the company formally announced the deal.

A market source told Prospect News in June that Citigroup will be bookrunner for the deal.

Traders cited the Journal story in noting what one called "a flurry in WorldCom bonds, up a couple of points." He quoted the Ashburn, Va.-based telecommer's notes has having firmed as high as 30.5 bid before easing only slightly off those peak levels by day's end to close around 29.75 bid.

Another trader saw those bonds in that same vicinity and pegged MCI's notes as having traded as high as 76.5 bid, before going home at 75.5 bid, 76.5 offered, with both parent WorldCom and MCI up several points on the session.

The Journal story had preceded the release of a report by former Securities and Exchange Commission Chairman Richard Breeden, a court-appointed monitor who spent a year scrutinizing the company's operations in order to come up with a massive report containing suggestions in 78 areas aimed at preventing a repeat of the kind of slipshod corporate governance and alleged outright fraud that drove the Number-Two U.S. long-distance operator into bankruptcy last year.

"WorldCom was the big mover and was lots of fun for about half an hour," a trader said, "but other than that it was dead, really dead. Not much was shaking."

One name which was seen moving around, however, was AmeriCredit, whose 9 7/8% notes due 2006 firmed to 93.5 bid from 92 on Monday, while its 9¼% notes due 2009 advanced to 90 from 88.5 bid.

The Fort Worth, Tex.-based financial services company's New York Stock Exchange-traded shares meantime jumped $1.35 (15.61%) to $10 on volume of 12.3 million shares, more than four times the norm, after the quarterly results - which had been delayed from their originally scheduled Aug. 6 release date - showed better-than-expected cash flow.

AmeriCredit said its unrestricted cash balance totaled $316.9 million as of June 30, compared with $238.1 million as of March 31. Additionally, in July the company received a $70 million refund of estimated tax payments made in fiscal year 2003.

The automotive lender reported an overall net loss of $17.1 million (11 cents per share), compared with a restated profit of $90.8 million, ($1 per diluted share), for the year-earlier period. The latest results included a $93.7 million pretax charge for building loss reserves.

The company projected that it would show net income of between $55 million and $70 million for the 12 months ending this December and between $125 million and $155 million for the fiscal year ending next June. It reported a $21.2 million profit for the just-ended fiscal year.

Anchor Glass Container Corp.'s bonds rose after it announced that it has filed a registration statement with the Securities and Exchange Commission for a proposed initial public offering of its common stock.

The company's 11% notes due 2013 rose to 109.5 bid from their previous level at 106. The notes, issued in January, have a standard three-year equity clawaback provision for buying back 35% of the bonds at 111.

Trump Holdings & Funding Inc.'s 11 5/8% notes due 2010 were heard three points higher at 90 bid, while a market observer quoted the Trump Atlantic City Associates 11¼% first mortgage bonds due 2006 two points better at 79, although at another desk, a trader called that "bad color" and said the Trump A.C.'s had been hovering in that 79-80 context "for at least two weeks."

The trader saw "a couple of things making some moves," in what was overall a quiet session, which he said tended to exaggerate the impact of the moves. Energy issues such as AES Corp. and Calpine Corp. Were a little stronger, with Calpine's 8½% notes due 2011 "on the move," opening at 71 bid, 73 offered and going home at 72.5 bid, 73.5 offered while AES's 8¾% secured notes due 2013 "continued to move," with "offers moving a little and bids hanging in;" he quoted the bonds at par bid, 102 offered.

"There were odd lot little things knocking around but not a lot of activity," he continued. "It was as quiet as yesterday."

Collins & Aikman Products Co.'s 11½% notes due 2006 were quoted fairly early as being up three points, at 77 bid, while its 10 ¾% notes had moved to 88 bid,90 offered from 85.5 bid.87 offered, despite a lack of fresh news on the auto components maker.

A trader quoted Levi Strauss & Co. bonds as having "been down - now they're up," with its 12¼% notes at 92.5 bid, 93.5 offered. He saw Gap bonds "continuing to do better," its 6.9% notes due 2007 at 105 bid.

On the downside, Dan River's 12¾% notes due 2009 slipped to 70 bid from 75 after Standard & Poor's changed its outlook on the textile maker's B- senior unsecured debt and its other debt to negative from stable.

A trader called Tuesday "a slow day overall" and predicted that "pent-up demand is going to come back into the marketplace after Labor Day. But for now, everybody's snoozin'."

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