Credit

BREAKING NEWS: $11.9 Billion WorldCom Deal Sets Record

The telecommunications giant sold the bonds off quickly by making them a bargain.
Ed ZwirnMay 9, 2001

In the largest bond deal ever by a U.S. firm, WorldCom, the country’s number two telephone company, priced some $11.9 billion of debt this morning in dollars, euros and sterling.

The five-tranche deal, which included paper maturing in three, seven, 10 and 30 years, was at least two-times oversubscribed, according to reports.

Investors reportedly flocked to the offering because it looked cheap in comparison with secondary trading levels for other outstanding telecom issues.

As a result, the deal priced today was worth about 70 percent more than the original forecasts leaked to the market late last week, which predicted that WorldCom would borrow $7 billion to $8 billion.

The three U.S. dollar segments of the deal consisted of $1.5 billion of 6.5 percent three-year notes, which priced at 99.823 percent of face value to yield 6.566 percent, or 215 basis points over Treasurys; $4 billion of 7.5 percent 10-year paper at 98.904 to yield 7.659 percent, or 245 basis points over; and $4.6 billion of 8.28 percent 30-year bonds at 98.098 to yield 8.425 percent, or 265 basis points over.

While all of the dollar portion was priced at the tight end of the forecast spread range, yields were some 25 basis points higher, meaning that the bonds sold more cheaply than comparable outstanding issues from other telecom firms such as Sprint.

The offering by Clinton, Miss.-based WorldCom had been expected to tip the scales as high as $12.3 billion. But the deal’s seven-year euro tranche came in at the low range of forecast at 1.25 billion euros, or about $1.1 billion. The tranche was expected to go as high as 1.75 billion euros.

On the other hand, interest was strong in the other currencies. The sterling segment came in about $71 million higher than expected, and the 30-year dollar tranche was increased by $600 million overnight ahead of today’s pricing.

WorldCom senior debt is rated A3 by Moody’s Investors Service and BBB- by Standard & Poor’s.

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