WorldCom Lenders May Extend $2 Billion
WorldCom Inc. has arranged to get as much as $2 billion from lenders to continue operating during a Chapter 11 bankruptcy filing, people familiar with the situation said.
J.P. Morgan Chase & Co., Citigroup Inc. and General Electric Co.’s GE Capital unit have submitted proposals for so-called debtor-in-possession financing that would allow WorldCom to continue providing telephone, Internet and data services while under bankruptcy protection, the people said. The lenders agreed to provide $1 billion to $2 billion, these people said.
WorldCom needs to secure the funds as lenders attempt to freeze assets, investors sue to recover losses and customers take their business to other carriers. The financing indicates that, as WorldCom’s finances deteriorate, the company is considering a Chapter 11 filing soon, analysts said.
Also Tuesday, Federal Communications Commission Chairman Michael K. Powell reiterated his view that WorldCom phone service probably would not be disrupted. He moved to distance himself from a previous interview in which he appeared to suggest that the FCC might change its policy and consider a takeover of WorldCom by a regional Bell local phone company.
“This ... is not a dramatic change in policy to simply state that the commission would entertain a transaction of a local company and long distance company if it was proposed,” Powell said. “I know of no legal doctrine or document by which we could refuse to review any merger that somebody proposed.... I do think we would have an acute eye on the concerns of continuing operations if such a transaction were to occur. But by no means did I mean to suggest that this was a very dramatic shift in policy.”
WorldCom has more than $30 billion in debt and is trimming 17,000 jobs and trying to sell assets to raise money. Last week, WorldCom said it wouldn’t pay a 60-cent-a-share dividend on MCI Group stock to save $71 million. WorldCom had $2.3 billion in cash March 31. On Monday, the company missed interest payments on its bonds, saving $74 million.
The Securities and Exchange Commission is suing WorldCom for fraud and, along with the Justice Department, investigating the company’s accounting practices.
Earlier in the week, the Clinton, Miss.-based company sued its former controller to recoup the nearly $800,000 paid two years ago to retain his services. The company filed suit Monday in Hinds County Circuit Court against David F. Myers of Madison, Miss. Myers resigned from WorldCom on June 25 when the telecom company revealed it had disguised nearly $4 billion in expenses to make the company appear more profitable.
WorldCom shares fell 2 cents, to 10 cents, on Nasdaq.
