WorldCom offers $6.1 million bond
By Reuters
Special to CNET NEWS.COM
August 6, 1998, 3:40 p.m. PT
WorldCom today sold $6.1 billion in debt to
finance its planned $37 billion acquisition of MCI
Communications, matching a record for the biggest
corporate bond offering ever.
The offering met with
strong demand from
international investors
who are eager to own
bonds issued by the
nation's fourth-largest
long-distance telephone
company, people
involved in the offering
said.
Salomon Smith Barney served as lead underwriter
for the offering, which consisted of four separate
parts including bonds with three-, five-, seven- and
30-year maturities.
WorldCom, based in Jackson, Mississippi, plans to
use the proceeds to finance its purchase of a 20
percent stake in MCI from British
Telecommunications for $7 billion. It plans to issue
stock to acquire the rest of MCI, in a deal valued
at $37 billion when it was announced in November.
A unit of RJR Nabisco Holdings has held the
record for the largest corporate bond offering. In
1989, the unit issued $6.1 billion in junk bonds in
connection with a leveraged buyout of the food and
tobacco giant, according to Securities Data, a
research firm.
Prior to WorldCom's bond sale, Norfolk Southern
held the record for the largest investment-grade
corporate bond offering, with a $4.3 billion issue in
1997, Securities Data said.
WorldCom's bonds are rated on the lower end of
the investment-grade scale by Moody's Investors
Service and Standard & Poor's., two major rating
agencies.
Moody's rates them Baa2 while S&P ranks them
BBB-plus, several notches below their triple-A
rating for bonds of the highest quality, but still
above junk bond status. Junk bonds are riskier but
pay higher interest rates to compensate investors.
As lead underwriter, Salomon helped WorldCom
sell the bonds to investors around the world today.
WorldCom stock closed the day up 2.1875 at
52.625, and MCI stock was up 2.3125 at
63.9375 both in afternoon trading.
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