Yes, I know about junk bond covenants. But there are no such covenants in WCOM's bonds that I am aware of. And WCOM's bonds were investment grade when they were issued and are still rated a few notches above junk by both Moody's and S&P.
Both Moody's and S&P are very keen to immediately downgrade if there is a hint of trouble nowadays, following the Enron debacle. For example Moody's downgraded Mirant's bonds to junk last December, and as a result the stock tanked to around 8, where I bought a bunch and sold at 14 a couple of weeks ago.
I trade stocks for fun with a very small portion of my capital, and of course I use stops. Thanks for the advice though.
As I said I think that WCOM is a BK candidate, but BK is by no means a sure thing. For one thing they have enough cash flow to last at least a year. If the telecom sector revives in the meantime, or some of their MCI initiatives succeed, they will probably make it. If telecom continues to deteriorate, BK is much more likely. In the meantime, I like the new CEO, and frankly, that's one of the reasons I bought it now for a trade. The other reason is that I think that by now the institutions have dumped the major part of their WCOM holdings, so this may turn out to be a classic panic bottom. Perhaps there will be a couple more days of volatility to clear out the margin calls.
Of course, I may be wrong, and WCOM may be another Enron.
Kyros |
