Tomorrow's report will tell a lot more:
WorldCom cash report is key
by Leon Lazaroff
Updated 03:06 PM EST, Jun-30-2002
TheDeal.com
all comes down to cash. When WorldCom Inc. files an updated and presumably accurate financial report, those attempting to handicap if and when the country's No. 2 long-distance provider will file for bankruptcy are certain to scan the report for the line item known as cash-on-hand.
"That's the figure that will tell us how long this company has before it would have to file for bankruptcy," said John Hodulik, telecom analyst at UBS Warburg.
The cash figure, of course, would then be contrasted with the company's current operating expenses to determine just how quickly WorldCom could be forced to seek protection under Chapter 11 of the U.S. Bankruptcy Code.
In response to WorldCom's admission that since the start of 2001 it hid $3.8 billion to inflate its earnings, the Securities and Exchange Commission Thursday ordered the company to file a detailed restatement of its finances before the opening of financial markets Monday, July 1.
Until those numbers are released, it is impossible, Hodulik stressed, to value WorldCom's various business units. Along with being the second-largest U.S. long-distance provider behind AT&T Corp., WorldCom's Internet arm, UUNET, handles more than 50% of the country's Web traffic.
That lack of certainty hasn't stopped Howard Jonas, chairman of discount long-distance provider IDT, from weighing in with what he calls an "informal" offer. Jonas said Friday, June 28, he would pay $3 billion to $4 billion for WorldCom's local phone operations that service businesses. WorldCom executives were reportedly skeptical that Jonas' statement would amount to anything.
This much is certain: At the end of the first quarter, WorldCom reported having $2.26 billion in cash. In May, the company drew down on a $2.65 billion credit facility.
Since then, WorldCom lowered its debt by $700 million and paid down its accounts receivable securitization by $500 million.
Subtracting for operating expenses of more than $300 million a month, Kevin Calabrese, telecom analyst at Argus Research, said he estimates WorldCom's cash at $3.7 billion.
If, however, WorldCom's bank lenders, a consortium led by Citigroup Inc. and Deutsche Bank AG, decide to call in the $2.65 billion credit facility because of the company's rash of accounting misstatements amount to fraud, total available cash could be sliced to little more than $1 billion.
"For a company the size of WorldCom, that could mean they're done in 60 days," Calabrese said. |
