OK, Mr. D. Advocate, no need to be concerned about liquidation preferences or the "burdens" of debt service. The realities are:
1. Assuming WCOM's CP, current maturities of LT debt, and other short-term debt obligations are retired (actually, I'd think they'd leve some CP out just to maintain a liquid market for their paper, but that's offset by cash assets), the net increase in debt is only about $3.4 billion for a 12-13% increase in debt.
2. Latest qtr EBITDA covers interest expenses nine times over and annualized EBITDA adequately covers interest plus all current debts (assuming all debt classified as current had to actually be repaid in the coming year - not a fair assumption).
3. In Q1, the gap between after tax cash flows (net income plus D&A) and CAPEX was only about $200 million. WCOM's current operations will not again need new capital and, if I recall comments in the qtrly CC correctly, will soon be generating free cash flows (i.e. after CAPEX).
4. WCOM now has the liquidity and flexibility to pursue opportunistic acquisitions with cash rather than its undervalued stock.
Just some things to think about.
Bob
PS: It looks like the deal ended up at $11.8 billion, with spreads shrinking by 10 basis points since yesterday. |
