Doug, WCOM apparently has $3.1 billion of debt maturing in November, so that much of the proceeds will go there. Press reports also estimate current CP outstandings of about $6 billion, noting that this will also be retired. Net of these retirements, WCOM should have about $30 billion of debt and close to $4 billion of cash. The gap between after tax (& after interest) cash flows and CAPEX last qtr was only about $200 million.
As for debt/equity ratios, I disagree that there are any hard and fast rules about what level "always increases risk". Yes, for any given company, higher leverage means higher risk, but it also means higher expected ROE. The "appropriate" level of D/E for a given company or industry depends, in part, on the volatility of cash flows. This ratio, of course, can also be skewed by GAAP accounting if you are using book equity for the denominator.
Bob |
