WorldCom May File Chapter 11 on Sunday

WorldCom Inc. may file the biggest bankruptcy petition in U.S. history as early as Sunday to cope with creditors owed more than $35 billion, people close to the situation said.

Meanwhile, a federal judge approved an agreement between WorldCom and a group of banks in which WorldCom will freeze certain assets while the banks temporarily halt legal proceedings aimed at recovering a $2.5-billion loan.

U.S. District Judge Jed Rakoff approved the agreement after all 25 banks that have sued WorldCom said they would sign off on the deal.

“We’re declining to comment on any speculation” about a bankruptcy filing, Julie Moore, a WorldCom spokeswoman, said.

Chapter 11 would keep creditors at bay and suspend lawsuits against WorldCom as it tries to restructure its debts under existing management. The second-biggest long-distance phone company, with $21.3 billion in 2001 sales, has more than 20 million customers and carries most of the U.S.’s Internet traffic.

Bloomberg News