I think this is a free article on wsj.com:
Telecom Debt Debacle Could Lead
To Losses of Historic Proportions
interactive.wsj.com
As the epic telecom bust reverberates around
the globe, it's getting to be a very long line.
Telecom companies, which gorged on some
$650 billion in debt in the past few years, are
failing in record numbers for that industry.
It's shaping up to be one of the biggest
financial fiascoes ever, with losses to
investors expected to approach the $150
billion government cleanup of the
savings-and-loan industry a decade ago.
"I don't know if there's a modern-day
precedent for the billions of losses" to
investors from the telecom industry, says
Greg Dube, head of global high-yield
investments at Alliance Capital.
What's unprecedented -- besides the
staggering debt totals -- is how little the assets of the troubled telecom
companies will likely be worth as the restructurings play out. Past
bankruptcy waves, such as those that swept the rail, retail, steel and
movie-theater businesses, left bondholders with about 40 cents on the
dollar, while bank lenders usually got most of their money back. But bond
investors may not be able to salvage much more than 10 cents on the
dollar from the telecom restructurings, with banks also taking a hit,
according to analysts. One reason: The industry's high-tech gear becomes
outdated at such a rapid clip. |
