Just keep telling yourself, "Worldcom won't fail, Worldcom won't fail"

Thu Feb 28 15:06:25 UTC 2002

>What is the reasoning for thinking that WorldCom may fail?  Is there
>something that I've missed?

They've laid a lot of people off, and according to the online Wall
Street Journal (costs money but is worth it) they would have major
negative cashflow if it weren't for all the money they're borrowing.
If Wall Street gets nervous, they're hosed.

Also, Bernie Ebbers has sweetheart deals with the company that would
make Ken Lay blush, which is not a good sign.  Tuesday's WSJ (both
paper and online) said:

 Few ordinary mortals enjoy a lender as generous as Bernard
 J. Ebbers's. But Mr. Ebbers is no ordinary guy. The brash chief
 executive of WorldCom Inc.  transformed an obscure reseller of
 long-distance calls into a New Economy powerhouse. WorldCom's shares
 made him a billionaire when they hit a high of $64.50 in June 1999.

 Since then, the shares have plunged, leaving Mr. Ebbers owing
 WorldCom about $341 million to cover loans he took to buy its
 shares. The Clinton, Miss., concern has stepped in to cover a loan of
 $198.7 million that he owed Bank of America and the company
 itself. He also has used $142.5 million of a $165 million credit line
 extended by WorldCom. That loan bears interest of less than 2.2% --
 the company's own rate for borrowing.

 Mr. Ebbers, who owned about 17 million shares and 8.3 million stock
 options as of a March 2001 regulatory filing, has offered his stake
 as collateral. He can't sell the stock without WorldCom's
 permission. He recently said he had assets "that are more than
 sufficient to cover the debt and those are for sale now." He declines
 to identify those assets.

 "This is more of a personal piggybank for one man," contends Brian
 Foley, an executive-pay consultant in White Plains, N.Y.  "He's
 gotten well beyond what they would have done for anybody else."

 WorldCom, which has laid off about 9,000 workers since January 2001,
 began lending Mr. Ebbers money in fall 2000 after he was forced to
 sell three million shares to cover a margin call on WorldCom
 stock. Mr. Ebbers didn't want to have to sell more WorldCom shares,
 which could hurt the stock price. "He takes his loan from the company
 very seriously," says Brad Burns, a WorldCom spokesman. "Mr. Ebbers,
 more than anyone, has a huge personal stake in greatly improving
 WorldCom shareholders' value."

-- 
John R. Levine, IECC, POB 727, Trumansburg NY 14886 +1 607 387 6869
johnl at iecc.com, Village Trustee and Sewer Commissioner, http://iecc.com/johnl, 
Member, Provisional board, Coalition Against Unsolicited Commercial E-mail