Last week $40 million of Williams Communications traded following financial concerns surrounding the name. Traders said Bank of Montreal sold $20 million of the name. Other dealers could not be determined by press time. The debt is currently trading in the 60-63 range, down 10 points over this year.
On Jan.15, Standard & Poor's downgraded the secured bank loan rating from B to CCC+ and also placed the company on CreditWatch negative. In the report,Michael Tsao, S&P analyst, raised the concern that Williams might not be able to comply with one of its bank covenants without an additional amendment. The next day, Howard Janzen, chairman & ceo of Williams, publicly refuted the downgrade in a letter to shareholders. Traders pointed to speculation that the company may be in default on its credit agreement as reasoning behind activity in the name. In order to service its debt, the company will have to restructure, said Tsao, adding, at this time the company has not considered a Chapter 11 filing or a debt-equity swap. Calls to company officials were not returned.
The credit, which has not seen very much movement over the last year, came into the spotlight with questions surrounding the funding of its business model for the upcoming year. "It's a company that's very highly leveraged," said Tsao, explaining that the interest and loan amortization expenses are going to be north of $500 million. Although the company recently secured deals including one to provide transmission services for broadcasters during the Salt Lake City Olympic Winter Games, and another to provide long distance service to Verizon Global Networks, Tsao said relative to the overall credit issue those deals are not enough to carry Williams through.