WorldCom Inc. plans to take out a $5-billion loan from banks after it exercises an option to borrow on an existing credit line for one year, according to people familiar with the matter.
The long-distance phone company, which has reported seven consecutive drops in quarterly profit, plans to take up its right to borrow $2.65billion on the existing credit line before it expires June 7.
Banks may demand that the company pledge assets to secure the $5-billion loan, which would repay the one-year credit line and help pay off $3.4 billion of bonds it has coming due in the next 18 months, sources said. WorldCom has $1.6 billion in cash and a projected $1 billion in free cash flow this year to meet its obligations, including $4.9 billion in capital spending.
WorldCom declined to comment. Its shares fell 6 cents to $2.15 on Nasdaq.