WorldCom to Offer Bonds in Biggest Sale This Year

WorldCom Inc. is prepared to sell as much as $8 billion in bonds with yields as high as 8.42% in the year’s biggest debt sale by a U.S. company, people familiar with the transaction said.

The No. 2 U.S. long-distance phone company may end up paying somewhat more than its peers have in similarly rated recent issues, according to Bloomberg data. The deal, if priced this week, would compete with at least $7 billion in other corporate bonds coming to market.

But WorldCom could be helped if yields on “junk” bonds continue to slide. Those yields have come down in recent weeks as the resurging stock market has improved the financial outlook for some high-risk bond issuers.

With ratings of “A3” by Moody’s Investors Service and “BBB+” by Standard & Poor’s Corp., WorldCom’s debt is just a notch or two above junk status. So if junk yields keep falling, bonds with somewhat higher ratings, such as WorldCom’s, could become more attractive to yield-hungry investors.

Proceeds from WorldCom’s offering could be used to refinance maturing debt and for acquisitions, analysts said.

The company may begin selling its bonds as soon as this week following investor meetings that are to finish Wednesday.

The expected $7 billion to $8 billion of notes and bonds could be priced as follows, sources said:

* Three-year notes to yield about 2.25 percentage points more than U.S. Treasuries of comparable maturity. That would mean a yield of about 6.79%, based on current Treasury yields.

* 10-year notes to yield about 2.55 percentage points more than 10-year Treasuries, or as much as 7.75%.

* 30-year bonds to yield about 2.75 percentage points more than 30-year Treasuries, or as high as 8.42%.

Salomon Smith Barney and J.P. Morgan Chase & Co. are arranging the sale, the people familiar with the transaction said. Banc of America Securities Inc. and ABN Amro Inc. are helping manage the sale.

WorldCom shares (ticker symbol: WCOM) eased 30 cents to $18.30 on Nasdaq on Monday. The stock has rallied from about $15 in mid-March.

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Junk Yields Pull Back

WorldCom Inc.’s massive bond offering, expected this week, may be helped along if the recent pullback in junk yields continues.

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Yield on KDP Investment Advisors index of 100 junk bonds, weekly closes and latest:

Monday: 10.66%

Source: Bloomberg News