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Morgan faces Tyco risk
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February 14, 2002: 10:53 a.m. ET
Report says bank's exposure to conglomerate could be as much as $1B.
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NEW YORK (CNN/Money) - J.P. Morgan Chase & Co. appears to have up to $1 billion in unsecured lines of credit to Tyco International Inc., giving it the greatest exposure to the company's recent financial uncertainty, according to a report published Thursday.
The Wall Street Journal said hard numbers on lending are not available, but that regulatory filings and interviews with analysts lead to an estimate that the New York-based bank's exposure to Tyco ranges between $700 million and $1 billion. J.P. Morgan Chase is the nation's second largest bank holding company behind Citigroup.
Shares of J.P. Morgan Chase (JPM: up $0.27 to $30.52, Research, Estimates) , a Dow Jones industrial average component, were up slightly Thursday morning while shares of Tyco (TYC: down $1.07 to $27.83, Research, Estimates) tumbled about 5 percent.
Tyco said last week it will repurchase all its $4.5 billion in commercial paper at scheduled maturities, and that it will fund these purchases with borrowing under its existing lines of credit. The paper's report estimates Tyco's total lines of credit for unsecured loans at $14.4 billion.
Banks generally like providing lines of credit because they rarely are used, the paper said. But during a recession, troubled companies can turn to the lines of credit, increasing risks for the banks. For example, Enron Corp. tapped lines of credit for billions of dollars before filing for bankruptcy court protection.
Tyco does not face any immediate threat of bankruptcy, but the company's stock has plunged recently following questions about its accounting practices and an earnings warning. Company executives tried to reassure investors that while it will miss current-quarter forecasts, they believe they soon will see a return to business as usual. 
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