Battered WorldCom said to be close to bankruptcy filing; would be nation's largest
Friday, July 19th 2002, 12:00 am
By: News On 6
JACKSON, Miss. (AP) _ Cash-strapped WorldCom could seek bankruptcy protection in the next few days, a filing that would be the largest of its kind in U.S. history, a source at the company said.
Analysts have said a bankruptcy filing was inevitable ever since the Clinton-based provider of long distance, Internet and data services disclosed last month that it had disguised nearly $4 billion in expenses to make it appear more profitable.
The source, who is familiar with the company's financial situation, said WorldCom could opt for Chapter 11 by Monday. Company officials wouldn't comment.
With more than $100 billion in assets reported at the end of March, a WorldCom bankruptcy would be twice as large as Enron's record-setting slide into Chapter 11 last fall.
``They have no choice,'' said Patrick Comack, an analyst with Guzman and Co. in Miami. ``It appears they've been burning through their cash. They have no money left.''
WorldCom, which has $30 billion in debt, has been in talks to secure $3 billion in financing.
Earlier this week, WorldCom sought to calm its creditors by offering to promise not to sell any of its subsidiaries over the next 80 days, a move that a lawyer for the company said was an effort to buy itself ``breathing room.''
At a hearing in New York on Wednesday, the company informed U.S. District Judge Jed S. Rakoff of the deal between WorldCom and major creditors, an agreement that would halt the progress of a lawsuit against the company by 25 banks to recover $2.5 billion in loans.
WorldCom lawyer Joseph Allerhand said returning the $2.5 billion to the banks, which have said they were misled, couldn't be done easily.
Allerhand said at the hearing that there was not $2.5 billion _ or anything near that figure _ ``sitting on a table at WorldCom untouched.''
WorldCom signed an agreement with the banks on June 8, 2001, to let it borrow, repay and reborrow up to $2.65 billion within a year.
In court papers, the banks said that ``on May 15, 2002, barely six weeks before disclosing a massive accounting fraud,'' WorldCom told the lenders by telephone ``that it intended to draw down the entire $2.65 billion in a single borrowing.''