WorldCom bank loan may take a hit Wednesday due to allegations of manufactured numbers

By Sara Rosenberg

New York, June 25 - WorldCom Inc. is expected to trade lower on Wednesday based on late day reports - subsequently confirmed by the company - of alleged fraud. Because of transfers discovered in an audit, the company will restate its earnings, reducing EBITDA by $3.055 billion in 2001 and $797 million in the first quarter of 2002.

"The bank loan and the bonds will probably trade lower tomorrow," the professional added.

WorldCom is currently involved in negotiations to replace its existing bank loans with a new $5 billion credit facility. The Clinton, Miss. communications company needs to raise an additional $300 million from banks in order to reach the $5 billion level for its new credit facility, said Susan Mayer, senior vice president and treasurer, earlier this month. Lead banks have already committed about $450 million of new money to the deal, Mayer added.

Some small banks are a bit hesitant to commit money to the communications company due to the negative attitude towards the sector, a fund manager said earlier on Tuesday.

In mid-June, WorldCom officials stated that the new loan should close within the next few weeks. Originally, the company estimated that the new credit facility would be in place within 30 days of May 9.

The most important thing is that the credit facility "gets done on our terms", WorldCom officials said at the 2002 annual stockholder meeting. The loan needs to be flexible, have good terms and non-restrictive covenants, officials explained, adding that whether the loan closes in June or July is not an important issue.

Xerox Corp. experienced a lot of trading activity Tuesday, according to a fund manager. The restructured term loan traded just below par. On Friday, Xerox bank loan paper received a bid of 93 and an offer of 95.

"Xerox was just restructured so it's trading hands from banks to funds," the fund manager explained.

On Friday, the Stamford, Conn. document company repaid $2.8 billion of its $7 billion revolver and obtained a new $4.2 billion credit facility. The new loan consists of a $1.5 billion term loan A due April 30, 2005, a $500 million term B due April 30, 2005, a $700 million term C due Sept. 15, 2002 and a $1.5 billion revolver, which includes a $200 million letter of credit sub-facility, due April 30, 2005, according to a filing with the Securities and Exchange Commission.

The term A, term C and the revolver have an interest rate of Libor plus 450 basis points. The term B has an interest rate that can range from Libor plus 400 to 450 basis points depending on the restricted assets security amount in effect.

J.P. Morgan Securities Inc. and Bank One were joint lead arrangers. J.P. Morgan Securities Inc. and Salomon Smith Barney Inc. were joint bookrunners. Bank One acted as administrative agent, collateral agent and letter of credit issuing bank. JPMorgan Chase Bank acted as documentation agent and Citibank acted as syndication agent.

Meanwhile, it was another day of wait-and-see for Adelphia Communications Corp., according to market sources.

Market participants have been watching Adelphia's actions this week to see if media reports of an upcoming Chapter 11 filing are accurate and which subsidiaries will enter into bankruptcy protection - and late in the day, well after trading ended, they proved true with the company making its filing. The Coudersport, Pa. cable company is said to have reached an agreement for $1.5 billion in debtor-in-possession financing with Citibank and JPMorgan Chase.

In other news, SPS Technologies Inc. said it obtained a new $130 million three-year unsecured revolving credit facility. The interest rate on the revolver varies depending on the ratio of debt to total capitalization and can range from Libor plus 100 to 150 basis points, according to a company spokesperson. There is also an unused fee that can range from 20 to 32.5 basis points.

PNC Bank NA led the syndicate and Allfirst Bank was co-agent.

SPS is a Jenkintown, Pa. designer, manufacturer and marketer of fasteners, specialty metals, magnetic products, aerospace structures and precision tools.

Semco Energy Inc. closed on a new $145 million credit facility, consisting of an $80 million three-year revolver and a $65 million 364-day facility, with a one-year term loan option, according to a company press release. Standard Federal Bank led the syndicate.

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