PCS-linked paper, Motorola fall on credit worries as WorldCom goes to junkyard

By Ronda Fears

Nashville, Tenn., May 10 - Credit concerns weighed on the market anew Friday, traders said. Volume slacked off considerably overall, but traders said there was significant selling in Sprint PCS-linked paper and Motorola - largely blamed on renewed worries about credit quality as the other foot fell on WorldCom with Standard & Poor's downgrade to junk a day after Moody's did so.

"There were the usual suspects - Adelphia, Calpine - but we also were seeing a lot of moves to get out of PCS and Motorola," said the head trader at a major investment bank in New York.

"Most of the selling is because people are nervous about credit quality. PCS, though, also was moving in sympathy with Western Wireless, which had a disappointing quarter."

After the close, the trader said, news that Sprint PCS is cutting another 300 jobs hit the tape. The trader said there may be some buying on the weakness next week if investors believe PCS is taking steps that will produce better operating results.

"Right now there are not a lot of believers in the state of affairs with most of the wireless names, the telecom sector as a whole really," the trader said.

"There's too much debt, too much competition and it's going to be very hard to imagine some of these situations continuing,"

After-hours trading in Motorola shares at least, the trader said, indicates there could be some buying next week.

Sprint PCS shares closed down $1.82 to $9.74 and the five convertibles linked to the stock also fell.

The Comcast/PCS 2% due October 2029, which was issued at 71.52, lost 2 points to 29 bid, 31 offered and the Comcast/PCS 2% due November 2029, which was issued at 81.63, fell 3.125 points to 29.25 bid, 30.25 offered.

The Cox/PCS 0.425% due 2020, which was issued at 42.59, was quoted down 0.125% to 41 bid, 41.5 offered.

The Liberty Media/PCS 3.75% due 2030, which was issued at par, dropped 2.125 points to 47.75 bid, 48.5 offered and the Liberty Media/PCS 4% due 2029, which was issued at par, lost 2.75 points to 53.125 bid, 53.625 offered

Motorola's decline was less severe, as the stock ended down 54c to $14.76.

The Motorola 0% convert due 2013, which was issued at 63.92, dropped 1 point to 75 bid, 76 offered.

The Liberty Media/Motorola 3.5% due 2031, which was issued at par, lost 1.5 points to 73.5 bid, 74 offered.

Lucent also felt some of the backlash of WorldCom's credit worries and Corning dropped on its own downgrade to one notch above junk by Moody's earlier this week, another dealer said.

"Lucent just can't seem to get over that $5 hump," the dealers said.

Lucent shares closed off 4c to $4.45 and the Lucent 8% convertible preferred due 2031 ended off 0.5 point to 87.75 bid, 88.25 offered while the 7.75% convertible preferred due 2017 declined 0.625 point to 91.75 bid, 92.25 offered.

Corning's 3.5% due 2008 lost 2 points to 90 bid, 90.375 offered as the shares ended down 23c to $6.38.

Credit worries sent some troubled names like Calpine lower on selling, too, traders said, without any other catalyst.

"Credit worries have never really gone away," said a trader at a hedge fund in New York.

"It's just when something like the WorldCom downgrade takes place, it really fires things up again. Also, it can provide a window of opportunity to take some profits if you're holding something that has made up some ground since the big furor was splashed all over the papers."

Calpine has seesawed since its troubles began soon after the Enron fiasco blew up, but the trader said there has been a steady ebb and flow in the name that has kept the paper active due to the volatility.

Calpine shares closed off 60c to $8.55. The 4% convertible bond due 2006 dropped 2.625 points to 84.375 bid, 84.5 offered. The trader said the Calpine convertible preferreds also saw some activity, and were lower as well.

Traders said there was some profit taking in Network Associates and homebuilders, and the selling pressured those converts. Network Associates' 5.25% due 2006 fell 7 points to 128.25 bid, 128.5 as the stock dropped $1.49 to $18.41.

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