WorldCom spreads blow out

Credit derivatives traders said bids were being offered up to 2,000bp above Libor, but there were no takers. WorldCom’s 10- and 30-year bonds were trading as low as 40 cents in the dollar, said a telecoms credit derivatives trader at a large European bank.

Ebbers transformed WorldCom from a sleepy phone company into a leading telco during the 1990s, with its share price hitting $64 in 1999. But its value since plummeted to around $2 per share following mounting debt, accounting probes and investigations into $366 million in personal loans the company made to Ebbers.

“We do not expect WorldCom debt to run for five years,” said another credit derivatives trader at a European bank.

None of the traders RiskNews spoke with said they had sold any cash-up-front, one-year protection on WorldCom debt.

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