- The Washington Times - Monday, October 9, 2006

BearingPoint Inc. is moving ahead with several new government consulting contracts while working to recover from a major court judgment and threats to delist it from the New York Stock Exchange.

McLean-based BearingPoint last week won a $19.8 million government contract to assist in U.S. Agency for International Development economic reforms in Serbia.

BearingPoint has agreed to provide consulting services for Serbia’s banking, insurance and private pension systems. It also plans to consult on Serbia’s tax administration and social security systems.

The contract could help Serbia “improve economic policy and promote private sector growth,” said James Horner, BearingPoint’s vice president of emerging markets practice.

The contract announced last week continues BearingPoint’s work for the U.S. government in Serbia that began in 2001 and has grown to include nearly $200 million in contracts.

In recent weeks, the company also won a $28 million contract from the state of North Carolina to replace its human resource and payroll computer system, an $8 million U.S. Navy contract to continue updating its records management system and a $14 million U.S. Agency for International Development contract to consult on tax policy and budget management for the government of Jordan.

Nevertheless, on Friday, credit ratings agency Moody’s Investors Service downgraded BearingPoint and put the company on review for further possible downgrades.

Moody’s said the downgrade reflects BearingPoint’s cash outflows so far this year, which were hurt by high finance and accounting system costs, delays in filing its annual financial statements and high turnover among the company’s 17,000 employees in 60 countries.

Company officials say their plan of focusing on their core consulting business would help them overcome the setbacks.

“The fundamentals are there,” said Robin Lineberger, BearingPoint’s vice president for public service. “The core business is strong.”

BearingPoint said in a Securities and Exchange Commission filing that as of Sept. 25, it was operating with $291 million in cash. Its stock, (NYSE:BE) closed yesterday at 7.96 on the New York Stock Exchange, up 7 cents or just under 1 percent from Friday’s close.

BearingPoint, formerly KPMG Consulting, is one of the world’s largest financial and technology consulting companies with nearly $3.5 billion in fiscal 2004 revenue. The company was spun off of KPMG in January 2000 and went public in February 2001.

BearingPoint has not yet filed its 2005 annual report with the SEC and said it would not get caught up on its financial statements until at least early 2007.

The New York Stock Exchange told BearingPoint that it must meet a Jan. 2, 2007, deadline to file its 2005 annual report or face a delisting from the stock market.

UBS Investment Research analyst Adam B. Frisch described BearingPoint’s financial problems as short term.

Fiscal 2006 “results were ahead of aggressive estimates and the business trends in [fiscal 2007] are very solid,” Mr. Frisch said in a research report. Despite the late SEC filing and debt litigation, “we remain positive on the shares because of the progress made to date and future potential improvements in revenue, margin and [free cash flow] growth,” he said.

The late filings were an issue in a New York Supreme Court ruling three weeks ago in which the state court said BearingPoint was in default to bondholders because of its failure to file regulatory reports on time.

BearingPoint argued in court filings that it was not required to give the reports to bondholders until 15 days after they were filed with the SEC, regardless of when the agency receives them.

The New York court ruled that the Trust Indenture Act requires companies to submit their financial information to bondholders under the same schedules required by the SEC, even if the reports are filed late with the SEC. BearingPoint has appealed the decision.

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