Wordcom taps $2.65bn debt as bank talks continue
We'll pay it back when we've borrowed some more
WorldCom Inc yesterday confirmed it is to break into its $2.65bn debt facility as the company struggles to reassure customers and investors that it has available cash to continue operating.
The company expects to draw the entire amount, then pay it back in a few weeks when it completes negotiations on a $5bn secured debt facility with its banks, CEO John Sidgmore and CFO Scott Sullivan said in a conference call with analysts yesterday.
WorldCom also said it is "on schedule" to renegotiate its accounts receivable securitization program with major lenders. The deadline for the talks to be completed is May 23.
WorldCom, which has a debt pile of about $30bn, is facing investor fears that it will not be able to service repayments and will run out of cash, or that customers will desert it. Sidgmore said yesterday he has called WorldCom's major corporate clients and, while concerned, they have no plans to switch providers.
In recent weeks, the company has had its bonds rated as "junk" status by the three major ratings firms, and was removed from the Standard & Poor's 500 index. But the company says these downgrades have limited effect on its ability to maintain liquidity.
"The most important message is that we are still a Fortune 50 company," said Sidgmore. "Fortune 42 to be exact.... that's important because it's based on revenue and success in the marketplace, nobody can take that away from us."
WorldCom also announced yesterday that it has dropped Arthur Andersen LLP as its auditor after 13 years, after the post-Enron controversy over Andersen's practices and independence. The firm has retained KMPG LLP as the replacement. The company said it was a difficult but necessary decision.