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Technology Stocks : WCOM
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To: JDN who wrote (11325)7/17/2002 9:56:19 AM
From: Oeconomicus  Read Replies (1) of 11568
 
I sure can understand the Banks feelings.

Feelings have nothing to do with it - it's just business. They are simply taking whatever steps the law allows to get their money out ahead of the other creditors. If they can get a judge to freeze the cash and give it back to the banks, some will then just walk away and others will look at the underlying business and use their new leverage to strike a much better deal for themselves than they could under current conditions. WCOM management, OTOH, is trying to protect all the cash they can and line up alternative financing to maximize their negotiating leverage over the bondholders as much as over the banks.

BTW, another BK data point for consideration: Williams Communications had $5B of bondholders pre-BK as well as some amount of bank debt. They gave up 55% of the equity to wipe out half the bond debt. A new investor added a little money to pay down some bank debt as well. Not as good a deal as Covad got, but not the end of the world either.

Bob
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