Saturday, December 18, 2004

BearingPoint Warns of Continued Turmoil, Acknowledges Subpoena

BearingPoint Inc. disclosed more troubles yesterday, saying that it will take a restructuring charge of as much as $67 million and may not be able to report that it has adequate procedures in place to prevent accounting fraud.

The "dilutive event raises concerns that the business maybe more troubled than previously thought," said analysts from Wachovia Securities, which downgraded the company's stock to "underperform" yesterday.

The offering is intended to give BearingPoint more liquidity, said Paul Hsi, an analyst with Moody's Investors Service. But, he added, it will also increase its overall debt.

"We've been tracking it very closely and have been sort of disappointed in terms of their ability to hit our expectations," Hsi said of the company.

The offering would reduce the chances that BearingPoint might be declared in default of existing credit agreements. A default would be triggered if the company failed to file an audited financial statement, which might occur if it is unable to meet financial accounting standards under the Sarbanes-Oxley Act. The act requires companies to certify that they have adequate accounting controls in place to prevent fraud. BearingPoint said it found a "material weakness" in its accounting procedures as recently as Nov. 19, and will likely find at least one more by the end of the year.

BearingPoint warned that even if it does implement changes, "it seems clear that there will be insufficient time" for the company's independent accountants to conclude that the new procedures are working and sign off on its financials.

BearingPoint Warns of Continued Turmoil, Acknowledges Subpoena

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