RE: Just keep telling yourself, "Worldcom won't fail, Worldcom wo n't fail"
What is the reasoning for thinking that WorldCom may fail? Is there something that I've missed? -----Original Message----- From: Fletcher E Kittredge [mailto:fkittred@gwi.net] Sent: Monday, February 25, 2002 12:51 PM To: nanog@merit.edu Subject: Just keep telling yourself, "Worldcom won't fail, Worldcom won't fail" This is an interesting NYT article (free registration required) for all of those of us trying to convince themselves that even if Worldcom goes bankrupt, UUnet will stay up. The example used is Global Crossings. If a company has complex enough finances and gets deeply enough under water, the courts might not be able to figure it out and creditors may just liquidate... whether or not it makes sense for the customers and society as a whole. If the government is not willing to step in for Enron, would they step in for UUnet? http://www.nytimes.com/2002/02/25/technology/25GLOB.html By the way, I never said to Dan Hollis and others: "You were right; I was wrong." about Global Crossing. If one had listened to Dan, one would have known 12 months that Global Crossing was in trouble. I read their press releases and balance sheets and didn't see it... Mea Culpa. regards, fletcher
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@iecc.com, Village Trustee and Sewer Commissioner, http://iecc.com/johnl, Member, Provisional board, Coalition Against Unsolicited Commercial E-mail
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Jon Stanley