WorldCom oblivious to weaker monthly report; airlines still flying high

By Carlise Newman

Chicago, Oct. 15 - WorldCom Inc. paper refused to be weighted down by slipping revenues in the month of August or news that AT&T Corp. would continue pursuing charges that it was allegedly defrauded in federal court.

The bankrupt telephone company said after the close Tuesday its net income and revenues declined in August from July, blaming lower long-distance calls volume network-wide and higher reorganization expenses.

WorldCom said its net income totaled $132 million in August, compared with $207 million in July. Revenues fell to $2.0 billion, down from $2.1 billion in July.

But WorldCom's bonds were seen rising 1.5 points to end the session at 36½ bid, 38 offered, one trader said.

"These reports usually have an effect on the bonds but nothing is stopping them from advancing lately," one trader said.

The Ashburn, Va.-based company also said its results were dampened by creditor settlements, higher administrative expenses due to its restatement and auditing efforts, and fewer billed business days in August than in July.

It ended August with $5.3 billion in cash, an increase of $600 million from the beginning of the month.

Rival AT&T on Tuesday said it dropped its objection to MCI's plan to emerge from bankruptcy, but it will pursue in federal court charges that it was defrauded. AT&T had objected to MCI's reorganization plan in July, when it claimed that MCI improperly routed telephone calls through Canada and on to AT&T's network to avoid paying network-connection fees.

WorldCom denied any wrongdoing.

"It was a fairly active day, with WorldCom kind of leading the pack, which is a familiar situation," a trader said.

Airlines were still somewhat active on Wednesday after Delta Airlines Inc. reported a narrower loss for the third quarter during the prior session.

Delta narrowed its third-quarter net loss and announced it has sold 11 planes that had been scheduled for delivery in 2005 as part of a plan to reduce costs and boost liquidity. Delta expects the sale of the planes to an unnamed third party to reduce capital expenditures through 2005 by about $500 million.

On Tuesday the airline reported a net loss of $164 million ($1.36 a share), compared with a net loss of $326 million ($2.67 a share) a year earlier.

Delta's10% notes due 2005 were seen at 93½ bid, 95½ offered Wednesday, up 1 point. Northwest Airlines Inc.'s 11¾% notes due 2005 were quoted at 89 bid, 90 offered, also up 1 point. United Airlines Inc.'s bonds were up 1.5 points to 15½ bid, 17 offered.

"The airline trifecta is doing pretty well these days," one trader said, referring to the three airlines that seem to appear most frequently on distressed trading desks.

Delta's latest results included a gain of $9 million ($0.08 a share), related to a debt exchange, and a charge of $1 million ($0.01 a share), stemming from an adjustment in the value of derivatives. The year-earlier period included charges of $139 million for write-downs of aircraft and equipment, as well as other items.

Without these items, Delta said its loss for the latest quarter was $172 million ($1.43 a share), compared with a loss of $212 million ($1.75 a share) a year earlier.

Analysts were expecting a loss of $1.46 a share for the latest quarter.

Collins & Aikman Corp. paper "was hot" Wednesday after the company said it had reached an agreement with the United Auto Workers union.

Collins & Aikman's 10¾% notes due 2006 were seen rising 5 points throughout the day, ending the session at 90 bid, 91 offered, a trader said

"The paper was up maybe 2 points in the morning and then just before the close when the news came out it went up another 3 points," he said.

Collins & Aikman and the UAW announced an agreement giving the UAW free rein to organize employees at the auto parts manufacturer.

The moves will maximize the competitive capability of the company through "a positive, non-adversarial partnership," the supplier of automotive interior systems said in a press release Wednesday. Collins & Aikman said it will recognize the union in plants where a majority chooses to unionize.

The UAW currently represents about 2,000 Collins & Aikman employees at its plants in Evart, Sterling Heights, Westland and Adrian, Mich.; Morristown, Ind.; and Oklahoma City.

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