WorldCom sells $11.9 billion in bonds

(Telephony) Global telecommunications giant WorldCom today sold $11.9 billion worth of multicurrency, high-yield bonds, the largest bond sale ever by a U.S. company and third largest corporate bond sale in history.

Originally slated as a $7 billion to $8 billion transaction, WorldCom raised its sale limit to $11.9 billion after heavy demand and bids totaling more than $21 billion. The sales were between 215 and 265 basis points more than similar maturity, though lower-yielding U.S. Treasuries.

Though analysts speculate the company could use sale proceeds for acquisition purposes, a WorldCom spokesman said proceeds would be used primarily to refinance short-term debt.

Ramkrishna Kasargod, senior analyst at Morgan Keegan, said putting the money toward its capital-spending program and to pay down short-term debt is the most practical use.

Customers will emerge from the market downturn more financially aware than they once were, and WorldCom strengthens its overall market position as it transfers short-term debt to long-term, Kasargod said.

“When you look at the number of failures in telecom… when making a choice of a carrier, customers and end users are going to be more sensitive to how long a company is going to be in business,” Kasargod said. “Companies with strong balance sheets should be able to take market share away from weaker carriers.”

Robert Ray, senior vice president at Moody’s Investors agreed. With $3 billion worth of incremental borrowing, $3 billion of debt maturing in November and $6 billion of commercial paper outstanding, WorldCom likely will use the huge cash influx to meet current financial obligations, he said.

“Given the uneven nature of the commercial paper market right now, it makes a lot of sense to have the flexibility not to rely as heavily on that market,” Ray said.

The sales included $1.5 billion of 6.5% three-year notes at an issue price of 99.823 cents on the dollar; $4 billion of 7.5% 10-year notes priced at 98.904 and $4.6 billion of 8.25% 30-year bonds priced at 98.098.

The company also sold 1.25 billion euros ($1.1 billion) of 6.75% seven-year notes at 99.919 cents on the dollar and 500 million sterling ($710 million) of 7.25% seven-year notes priced at 99.77.