WorldCom, Crippled by Debt, Files Largest Bankruptcy - bloomberg.com

verfasst von Cosa, 22.07.2002, 12:40

07/22 04:25

<font size="4"> WorldCom, Crippled by Debt, Files Largest Bankruptcy (Update1)</font>

By Jeff St.Onge

New York, July 22 (Bloomberg) -- WorldCom Inc. filed the largest bankruptcy in
U.S. history, pledging to salvage a company hobbled by accusations of fraud and
dwindling cash.

The company sought Chapter 11 protection from creditors in U.S. Bankruptcy
Court in Manhattan, listing $107 billion of assets and $41 billion of debt, including
$24 billion in bonds. The decision was anticipated for weeks after WorldCom said
it hid $3.85 billion in costs over five quarters to boost profit.

WorldCom, which handled more than half the world's Internet traffic and
employed 85,000 people as its market value rose above $100 billion, was
founded in 1983 in a Mississippi diner. It grew through more than 75 acquisitions
to become the second-biggest U.S. telecommunications provider.

``WorldCom is better off in bankruptcy,'' said Gary Hindes of Deltec Asset
Management Corp. ``They're burning through cash like crazy.'' Bankruptcy lets
them ``come out with a clean slate.''

Filing for Chapter 11 may help WorldCom survive.

Plummeting Fortunes

WorldCom arranged a $2 billion bankruptcy credit line to help fund operations
during its reorganization. J.P. Morgan Chase & Co., Citigroup Inc. and General
Electric Co.'s GE Capital unit agreed to provide the loan, secured by company
assets. The company will ask a judge for $750 million pending approval of the full
amount, WorldCom spokesman Brad Burns said.

The Clinton, Mississippi-based company's fortunes have plummeted since 1999,
when it was gobbling up rivals and challenging the long-distance dominance of
AT&T Corp. Declining sales and growing debt squeezed the industry and wiped
out more than $100 billion in the company's market value.

The company, with more than 20 million customers, said the bankruptcy
reorganization has a positive side.

``Chapter 11 enables us to create the greatest possible value for our creditors,
preserve jobs for our employees, continue to deliver top-quality service to our
customers and maintain our role in America's national security,'' Chief Executive
Officer John Sidgmore said in a statement.

Unanimous Decision

WorldCom's board agreed to seek Chapter 11 protection at a meeting Sunday
afternoon. The filing doesn't cover WorldCom's international operations, Burns
said.

``They look like a going concern even after you adjust for the $3.85 billion,'' said
Edward Altman, a professor at New York University's Stern School of Business.

WorldCom's shares, which already had fallen, have plunged more than 90
percent since June 25 when WorldCom disclosed the accounting irregularities.
They traded as high as $62 in 1999 and sold for 9 cents on Friday, and the
bankruptcy is likely to make them worthless. WorldCom bonds trade at pennies
on the dollar.

Co-founded by Bernard Ebbers, WorldCom borrowed in excess of $30 billion to
fund its acquisitions at the height of the 1990s technology boom.

Biggest Purchase

The biggest purchase netted long-distance unit MCI Communications Corp. for
$47 billion in 1998. WorldCom's sales peaked at $35.9 billion in 1999 and fell to
$35.2 billion in 2001.

Federal Communications Commission Chairman Michael Powell said in a
statement he didn't think service would be disrupted for WorldCom's customers.

By law, a telecommunications carrier must notify the FCC and file for regulatory
permission to begin shutting down service to voice or data customers. Federal
law then prohibits the company from ending service for at least 31 days, a period
Powell said he would extend if necessary to protect consumers.

Record Pace

WorldCom's filing adds to what already was a record pace for U.S. corporate
bankruptcies this year. Before WorldCom, 131 public companies with about $150
billion in assets had filed, according to BankruptcyData.Com.

Last year, 255 publicly traded companies put $260 billion of assets under court
protection, almost triple the record that had stood for a decade. That figure
includes Enron Corp.'s then-record $63.4 billion bankruptcy in December.

Global Crossing Ltd., the fiber-optic network owner that filed for bankruptcy in
January, is among the victims of the collapse in telecommunications companies.
Dozens in the industry filed in the past two years, including At Home Corp.,
Winstar Communications Inc. and PSINet Inc.

Banks cut off credit to WorldCom after the Securities and Exchange Commission
filed fraud charges and the company's financial restatement triggered a $2.65
billion loan default.

The company is also under investigation by the Justice Department and at least
two congressional committees. WorldCom is conducting an internal accounting
probe back to 1999 that lawmakers say may reveal another $1 billion in
misreported costs.

Ebbers' Resignation

Ebbers resigned as chairman in April, owing WorldCom more than $408 million
for loans. Sidgmore, vice chairman of WorldCom since 1996, took over as CEO
and WorldCom replaced auditor Arthur Andersen LLP. Chief Financial Officer
Scott Sullivan was fired.

The company is firing 17,000 workers and has said it will sell wireless assets
and operations in Latin America and Japan to raise cash. It missed a $79 million
payment on Monday and has said it would save $71 million by not paying a
scheduled stock dividend.

WorldCom may shed some debt by swapping bonds for equity because the
company will have difficulty raising cash from asset sales, investors say.

``There's a lot of value here, and bondholders are going to want it, so it's going to
be contentious,'' said Eric Tutterow, an analyst at KDP Investment Advisors.
Bondholders may get 20 cents on the dollar in stock of a reorganized company,
he said.

J.P. Morgan Trust Co., representing bondholders owed $17.2 billion, is listed in
the federal court filing as WorldCom's largest creditor. Other top creditors are
Mellon Bank NA, trustee for bondholders owed $6.6 billion, and Citibank NA,
trustee for bondholders owed $3.29 billion.

Voting Shares

J.P. Morgan Chase & Co., owed more than $3 billion, is the largest single
bondholder listed in the filing. Deutsche Bank AG is owed more than $240.7
million for a bank loan, court papers show.

At Sunday's meeting, WorldCom's board approved two board members to
succeed Ebbers and Sullivan. The company plans to name Nicholas
Katzenbach, a former U.S. attorney general, and Dennis Beresford, a professor
of accounting at the University of Georgia who formerly served as the chairman of
the Financial Accounting Standards Board.

WorldCom will hold a press conference at 9 a.m. in New York to discuss the
bankruptcy.

Quelle: Bloomberg.com

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gesamter Thread:

• WorldCom, Crippled by Debt, Files Largest Bankruptcy - bloomberg.com - Cosa, 22.07.2002, 12:40
  • Re: WorldCom, kommt die Deutsche Bank jetzt groß raus? Lauter Sicherheiten - Baldur der Ketzer, 22.07.2002, 15:10
    • Lauter Sicherheitendie aktivieren Deine Depots - foreveryoung, 22.07.2002, 15:17
    • Re: Bank-Gequake - dottore, 22.07.2002, 16:16
      • Re: Klasse, das Gespräch kann ich mir lebhaft vorstellen. - JLL, 22.07.2002, 16:39
      • Re: Bank-Gequake - das kenn ich:-) UNS gibt es schon 110 Jahre - Baldur der Ketzer, 22.07.2002, 16:45
      • Re: Bank-Gequake - Euklid, 22.07.2002, 17:45