WorldCom Unveils Reorganization
WorldCom Inc., trying to emerge from the largest-ever U.S. bankruptcy, unveiled a reorganization plan Monday that would strip it of nine-tenths of its debt and give it a new name and headquarters.
WorldCom, whose plan gives creditors control of the company, said it would take the name of its long-distance service, MCI, and shift its headquarters to MCI’s base in the Washington suburb of Ashburn, Va., from Clinton, Miss., where it was founded.
The plan, which erases about $36 billion in debt, has won the backing of 90% of its creditors, which should ensure that the plan wins court approval. The plan also calls for general unsecured creditors to get cash payments equal to about 18% of an allowed claim and 7.2 shares of new common stock for each $1,000 of a creditor’s allowed claim.
In the meantime, WorldCom can’t legally change its name until it emerges from Chapter 11 protection, which could come as early as September.
However, WorldCom’s Web site as of Monday redirects visitors to MCI.com., and company news releases about the reorganization plan refer to Michael Capellas as chairman and chief executive of MCI, not WorldCom.
Capellas, who spoke to the company’s 55,000 employees via Webcast from Ashburn on Monday, also spoke to Mississippi Gov. Ronnie Musgrove and U.S. Sen. Trent Lott (R-Miss.), to assure them that the Clinton headquarters would remain as a WorldCom facility.
There are about 1,600 WorldCom employees in the Clinton area.
WorldCom also named a new chief financial officer: Robert Blakely, former CFO of Lyondell Chemical Co. and Tenneco Inc.
Telecommunications industry analysts say the smaller debt load -- $3.5 billion to $4.5 billion -- could give WorldCom an advantage over competitors such as AT&T; Corp. because it still has its vast communications network but not the $41 billion in debt it had when it filed for bankruptcy protection in July.
WorldCom has since admitted to a massive accounting fraud that could top $11 billion.
While it has struggled to emerge from bankruptcy protection and shine its tarnished image, competitors and special interest groups have lobbied to prevent it from reemerging, fearing WorldCom would ignite a price war. AT&T; and Sprint Corp. have succeeded in stealing thousands of customers away from WorldCom.
