WorldCom seeks Chapter 11 protection

By Susan Rush
from CED Broadband Direct, July 22, 2002

As expected, mounds of debt and a misreport of nearly $4 billion in expenses, has plunged WorldCom Inc. into a Chapter 11 bankruptcy filing. The telecom giant's bankruptcy is the largest in U.S. history.

In its filing, WorldCom listed $107 billion in assets and $41 billion in debt. The Enron filing, which was the largest in US history for a short spell, pales in comparison, coming in at almost half of WorldCom's filing.

The protective Chapter 11 shroud is designed to keep creditors at arm's distance and suspend dozens of lawsuits as WorldCom attempts to restructure its debts and negotiate a recovery. WorldCom says it has secured $2 billion in debtor-in-possession financing that will enable it to operate as business as usual during the proceedings.

"We will use this time under reorganization to regain our financial health and focus," WorldCom President and CEO John Sidgmore said in a statement. Sidgmore said he expects to reduce debt through a debt-for-equity swap, which would give bondholders an ownership stake in the reorganized company. Although a specific date was not given for the company to emerge from Chapter 11, Sidgmore said the reorganization will last at least through the first quarter of 2003.

The filing includes WorldCom and substantially all of its active US subsidiaries.