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003 Worldcom Qns

Worldcom is considering issuing $6 billion in corporate bonds but faces risks from the large size of the offering. Corporate bonds differ from bank loans in that bonds are issued to public investors who price them based on the company's credit risk. Investors may demand higher yields for longer term bonds due to greater uncertainty over Worldcom's future financial performance and economic conditions.

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Vu Duy Anh
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965 views1 page

003 Worldcom Qns

Worldcom is considering issuing $6 billion in corporate bonds but faces risks from the large size of the offering. Corporate bonds differ from bank loans in that bonds are issued to public investors who price them based on the company's credit risk. Investors may demand higher yields for longer term bonds due to greater uncertainty over Worldcom's future financial performance and economic conditions.

Uploaded by

Vu Duy Anh
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Worldcom, Inc.

: Corporate Bond Issuance

Questions for Analysis

1. Is it a good time to issue? What factors favor issuing now and what factors do not? 2. What risks does WorldCom face in issuing up to $6 billion in debt? How will investors and the market react to the large size of the offering? Would a series of smaller issues be a better strategy? 3. How does financing with corporate bonds typically differ from a bank loan? What are the major uncertainties that a firm faces when it issues securities? 4. Estimate the expected costs (percentage yields) that WorldCom will incur on the 3-, 5-, 7-, and 30-year notes. How would you attempt to explain to someone who is unfamiliar with credit markets why the bonds would be priced in this manner?

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