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To: dtown1 who wrote (74370)	12/13/2000 11:33:55 AM
From: john	Read Replies (1) \| Respond to of 150070

Margin Calls Compound the Stress of CEOs' Lives: David Pauly New York, Dec. 13 (Bloomberg) -- With companies firing their chief executive officers with alarming regularity -- Coca-Cola Co., Procter & Gamble Co. and Lucent Technologies Inc. did it this year, to name a few -- you'd think CEOs would try to avoid further stress. Instead, a few have begged for additional anxiety by taking out big personal loans, using their own companies' shares as collateral. In one case at least, the CEO used the money to speculate in the stock market. As stocks fell, stockbrokers and banks issued margin calls, asking the CEOs to put up more money. They didn't, so their lenders sold the collateral. There have been three noteworthy cases in the past three months: WorldCom Inc.'s Bernard Ebbers said in a filing with the Securities and Exchange Commission in October that he sold about $78 million of shares in the long distance telephone and Internet services company to meet a margin call. PSINet Inc., an Internet service provider for businesses, said on Nov. 16 that a bank was selling some or all of the 11.4 million PSI shares CEO William Schrader had used to secure a loan. Safeguard Scientifics Inc., a venture capital company, said a week ago yesterday that its boss, Warren ``Pete'' Musser, who will be 74 Friday, had sold 7.5 million of the company's shares to repay money he had borrowed from brokers to buy securities. They Didn't Pay You might dismiss all this on the notion that these CEOs are all well fixed and can easily afford to take such personal risks. Still, in all three cases, the CEOs couldn't or wouldn't meet their margin calls. Schrader's sale seems to have just about wiped out his PSINet stake, though a company spokesman says he still owns some shares. Musser's selling covered 82 percent of his Safeguard Scientifics shares. The company also said it had loaned Musser $10 million, which he had repaid, and guaranteed another loan for $35 million. Ebbers's shares sale on Sept. 28 covered only about 15 percent of his WorldCom shares but the CEO has put up other shares as collateral. WorldCom's latest quarterly report to the SEC showed that in November the company agreed to lend Ebbers $25 million, of which $11.5 million had been borrowed, and to guarantee up to $100 million Ebbers had borrowed from an institutional lender. This was in addition to the $50 million WorldCom had lent Ebbers in September. WorldCom said Ebbers had used or would use money from the November agreements to repay loans secured by WorldCom shares. Ebbers also agreed to use WorldCom shares as collateral to his borrowing from the company. Full Plates CEOs in general have plenty to be concerned about -- building new factories, keeping customers and employees happy, increasing profits -- without worrying whether margin calls will embarrass them before their boards, shareholders and the public. These three CEOs in particular have plenty to stew about. Ebbers' 1998 purchase of MCI Communications, the second-largest U.S. long distance company, looks problematic with long distance calls becoming a commodity business, and Ebbers plans to set up a tracking stock for it, separating long distance results from those of the rest of the company. WorldCom shares have dropped 67 percent this year. The same day PSINet announced Schrader's stock sales, it said it had hired Goldman Sachs Group Inc. to consider a sale of the company, which has lost money ever since it went public in 1995. Safeguard Scientifics owns stakes in 50 companies, many of which make hardware and software used to run Internet sites. Its shares have declined 85 percent this year. The margin calls expose the CEOs as being as foolish as amateur speculators, assuming stocks only go up. Are these the kind of executives shareholders want running their companies? Dec/13/2000 6:54 ET For more stories from Bloomberg News, click here. (C) Copyright 2000 Bloomberg L.P