I would echo your comments.
I have NO idea what will be the future of WCOM, however, some signs are fairly obvious:
-- downgrades of some bonds to junk status
-- withholding of interest payments on some bonds
I would suggest that the rating agencies have more information than the average investor at their disposal of the true FINANCIAL condition of WCOM and that they do not downgrade securities capriciously.
In addition, it is a very SERIOUS situation when any company fails to meet its debt payments (interest OR principal) which NO company would normally do unless they
had a very good reason for doing so. The very good reason is usually conserving cash.
The pattern in WCOM to this point is dramatically similar to that of TSIX, XOXO, MCLD, WCG, GX and others, (all of whom moved into Chapter 11)
-- management says: "we are in good shape--no chance of
running out of money"
-- downgrades of debt
-- shutting off of cash outflows
-- Chapter 11
I am not saying you can't make money on this by buying
bonds at fire sale prices and ending up with equity, but that is a specialized situation that is best down by somebody in fuller possession of knowledge of the true situation than the average investor.
Just my opinion. It you want to buy a ton of WCOM common
at depressed prices, now or 25 cents, be my guest. It is, after all, your money.
Namaste!
Jim |
