The market for WorldCom's $2.65 billion, 364-day revolver has fallen from 92-95 to 80-85 after reporting first quarter losses and ratings agency downgrades. No trades could be confirmed. "The question is, can you find a real bid," one trader explained of the discrepancy. With the bonds trading in the 60s range, the true value of the 364-day revolver is priced off in the 80-85 range, a dealer explained.
The line is set to expire in June, but reports indicate that the company is talking with its banks about renewing that bank line. Investors worry that the unfunded revolver will be drawn down. "They are going express to distressed," one market player speculated.
The company reported losses of 78% in the first quarter and Fitch Ratings and Moody's Investors Service downgraded the name from BBB- to BBB+ from A3 to Baa2, respectively. The market for the $3.75 billion multi-year revolver has been quoted from 95-97 to 96-98. That line is also up in June, but no renewal of the line is expected. Variation over appropriate levels for the name began after reports that the Securities and Exchange Commission is investigating the company's accounting practices (LMW, 3/18). Scott Sullivan, company cfo and treasurer, could not be reached by press time.