WorldCom Files for Largest Bankruptcy in U.S. History
The parent company of MCI, WorldCom listed over $107 billion in assets in its filing, far exceeding that of Enron, which had claimed the largest corporate bankruptcy last December.
Analysts expected the telecom company, which has been struggling with dwindling revenue, to file for bankruptcy ever since it admitted in late June to not accounting for some $3.8 billion in expenses over the last five quarters.
After WorldCom failed to make a $74 million interest payment on its massive debt last week, the company filed for bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York. Its international operations, which include subsidiaries in over 65 countries, were not included in the filing.
Phone service for its 20 million residential and business customers is not likely be disrupted due to an immediate $2 billion line of credit WorldCom received from a new group of lenders, including J.P Morgan, Chase & Co., General Electric Capital Corp. and Citigroup. The lenders promised the troubled telecom the $2 billion debtor-in-possession (DIP) funding as long as WorldCom agreed to seek Chapter 11 protection from its creditors; these new lenders now stand first in line to be repaid.
“With the DIP financing, we’re much more stable financially than we would have been under another scenario. I see no chance of service disruptions or network outages or all these things that people have been concerned about,” WorldCom chief executive John W. Sidgmore said.
Company spokespeople said WorldCom has enough money to maintain payroll for its 60,000 workers for at least one year. Though the telecom giant laid off nearly 17,000 employees last month, officials said it does not plan any additional cuts. WorldCom, founded in 1983 as LDDS Communications, is the country’s second-largest long-distance company and largest handler of Internet data.
WorldCom shares closed at nine cents on the tech-heavy Nasdaq last Friday. WorldCom’s stock, which had spiked to $64 in 1999, had been a heavily promoted Wall Street favorite.