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WorldCom Moves Higher

19 Apr 2003

WorldCom bank debt ticked up slightly on news that the company has filed its plan of reorganization. While the plan suggests that senior debt holders, including lenders, will receive 35.9 cents on the dollar, the bank debt paper only crawled about two points higher to the 26 ­ 27 1/2 context. The bank debt is quoted about a point behind the company's bonds due to its relative illiquidity. No bank debt was said to have traded. "The real question is if the banks will want to sell," said one trader, explaining that the amount of equity that lenders will ultimately receive under the reorganization plan will affect whether or not there will be any sellers.

According to the plan of reorganization, senior lenders can elect to receive 14.36 shares of new common stock for each $1,000 of their allowed claim or new notes in the amount of 35.9 cents for each dollar of claim. However, if senior debt holders, including those with claims to $2.81 billion in principal amount of bank debt and $24.25 billion in senior notes, elect to receive new notes in an aggregate principal amount greater than $3.42 billion, the plan's oversubscription clause will be triggered. In the case of oversubscription, each senior debt holder will receive new notes in a principal amount equal to .359 times the creditors' pro rated claim and 14.36 shares of new common stock for each $1,000 of claim unfulfilled. Calls to the company were not returned by press time.


19 Apr 2003