NEW YORK (CNN/Money) -
As the smoke clears from WorldCom's multi-billion-dollar accounting improprieties, financial firms with exposure to the troubled telecom concern are assessing the damage.
American Express Co. (AXP: up $1.41 to $37.08, Research, Estimates) and General Electric Co. (GE: up $0.40 to $29.90, Research, Estimates) will both write down investments in WorldCom, although both firms reiterated guidance for the second quarter, saying they expect to meet analysts' estimates.
Standard & Poor's also issued a statement saying that three of the largest lenders to the telecom sector, Citibank, JP MorganChase Bank and Bank of America, do not have material exposure to WorldCom, but do have sizable credit lines to the company that have not been tapped.
S&P said that in the unlikely event that these credit lines are activated, the increased exposure to the banks is not large enough to warrant a rating change on the lending institutions.
Two of the banks have lent WorldCom less than $100 million and have a net positive position after accounting for swaps that hedge against the loan exposure, a source familiar with the loan situation told CNNfn. The third bank lent WorldCom approximately $150 million and has exposure of $15-$20 million after accounting for hedges.
Mellon Financial has announced exposure of $100 million to WorldCom.
American Express said its exposure to WorldCom debt is about $90 million and it will take a second-quarter pre-tax charge of $75 million to $80 million. The company said it is comfortable with Wall Street's second-quarter earnings estimate of 50 cents a share, compared with 13 cents a year earlier.
General Electric will write down the value of its WorldCom bonds by $110 million in the current quarter. GE is valuing the bonds at about 20 cents on the dollar, according to GE's chief financial officer Keith Sherin.
The company also backed its second-quarter guidance of 44 cents a share, in line with analysts' estimates.
Sherin added that GE, which owns NBC television, expects "solid double-digit earnings growth" in the third quarter and is comfortable with estimates for the full year. Analysts see the company earning $1.65 a share in 2002, according to research firm First Call.
In addition, GE expects to record a $358 million benefit in the second quarter from a favorable court decision in a federal tax settlement, Sherin said.
--from staff and wire reports