WorldCom Inc. has secured $1.5 billion in funding, but the communications giant is not out of the woods yet.
The accounts-receivable facility, which does not include any ratings triggers, replaces a $2 billion receivables program that expired yesterday. The lead banks on facility are Citigroup and JPMorgan Chase. The funding will give WorldCom a little reprieve as the company works to secure a new $5 billion credit line with lenders.
As of late, the telecom company has been plagued by a slowdown in consumer spending, a lagging long-distance market and questions from the Securities and Exchange Commission about some of its accounting practices. Ratings firms Standard and Poor's and Moody's Investors Service recently downgraded WorldCom's rating to below investment grade.
Earlier this week, WorldCom announced plans to eliminate its tracking stock structure on July 12, folding its MCI group stock back into the WCOM stock. The move will save the company $284 million a year, according to WorldCom's calculations.. Each outstanding MCI share will be converted to 1.3594 shares of WorldCom Group common stock. Fractional shares will be paid in cash. As of the conversion date, dividends on shares of MCI group common stock will cease to be paid. However, MCI group common stock holders of record at the close of business on June 30 will be paid the previously declared dividend of 60 cents per share, payable July 15.
The $1.5 billion in funding did little to enthuse investors. As of 11:06 a.m. EDT, WorldCom shares were down 5 cents to $1.75. The value of WorldCom's stock has plummeted 90 percent this year.