Tyco shares recover as investors relax

NEW YORK - Tyco International Ltd. investors breathed easier on yesterday NZT, as its shares rose for the third straight day on renewed confidence in the conglomerate's financial position.

But for the stock to gain more ground, one analyst said the company would have to demonstrate an ability to generate earnings growth after two profit warnings in the past month.

Late Thursday the company filed a quarterly report with the Securities and Exchange Commission, known as an 8-K, which provided further details about $US4.6 billion in free cash flow it would have in 2002.

"The company's 8-K filing should give investors a lot of comfort that there is absolutely no liquidity issue at Tyco," said Credit Suisse First Boston analyst Michael Regan.

Further demonstrating increased confidence in the company's solvency, Tyco's 6.75 per cent notes maturing in 2011 were bid Friday afternoon near 88 cents on the dollar, after sliding as low as 74 cents earlier in the week.

The notes are still off 16 cents since just before Tyco announced plans to split into four parts on Jan. 22.

Shares of Tyco -- which has lost about $US60 billion in market value since the beginning of the year and is down about 20 per cent on the week after big sell-offs Monday and Tuesday -- were up $US1.52 or 5.4 per cent, at $US29.57 in late Friday trading on the New York Stock Exchange.

On Tuesday, the stock slumped to an intraday low of $US22.

"The move from about $US22 to $US30 was an increase in confidence in the company's solvency," said Legg Mason analyst Barry Bannister. "But it will have to do more to move higher, since two profit warnings have occurred and there still are some doubts about its earnings potential."

Shares of Tyco were battered earlier in the week after the company said on Monday it would tap a $US5.9 billion credit line to pay off debt. CIT, the company's financial arm, said Tuesday it would tap $US8.5 billion in credit lines.

Both Tyco and CIT were downgraded by Standard and Poor's, and Fitch Ratings downgraded CIT.

On Wednesday, the Bermuda-based maker of products ranging from fire sprinklers to plastic hangers held a conference call in which it declared that there were no liquidity problems at the company.

"There is a crisis in confidence in Tyco," Chief Executive Dennis Kozlowski declared on the call. "There is no crisis in reality."

On the Wednesday call, Tyco also said it could miss its fiscal 2002 earnings per share target of $US3.70 by as much as 40 cents per share because of higher debt costs and continued weakness in its electronics sector. Last month, the company said a downturn in the electronics industry would hit its March quarter.