Monday July 15, 1:24 am Eastern Time
Three Big Lenders to Provide WorldCom With DIP Financing
biz.yahoo.com
Citigroup Inc. (NYSE: C - News) , J.P. Morgan (NYSE: JPM - News) Chase & Co . , and General Electric Co .'s financial-services arm, GE Capital, would likely provide WorldCom Inc. (NasdaqNM: WCOM - News) ( WCOME) the financing in a potential bankruptcy-court proceeding even as 25 other lenders try to freeze WorldCom's dwindling cash, Monday's Wall Street Journal reported.
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According to people familiar with the situation, Citigroup, J.P. Morgan Chase and GE Capital can move quickly to provide so-called debtor-in-possession financing that would coincide with bankruptcy-court proceedings.
J.P. Morgan Chase and Citigroup were two of the 27 banks that provided WorldCom a $2.65 billion loan in May, just weeks before the improper-accounting announcement.
On Friday, the other 25 lenders, worried that their unsecured loan may be lost, asked the New York Supreme Court for a temporary restraining order to prohibit WorldCom from using the bank loan. Judge Helen Freedman denied the unusually aggressive request and scheduled a Tuesday conference on the issue. The lenders also filed a lawsuit against WorldCom.
"We would be essentially out of business if we cannot use the cash," said WorldCom attorney Joseph Allerhand of New York firm Weil, Gotshal & Manges at a court hearing on Friday.
Still, it is unlikely that WorldCom will be able to secure new financing from its banks without entering bankruptcy-court protection, one member of the bank group said. J.P. Morgan , Citigroup, and GE Capital were prepared to work all weekend to provide the financing had Judge Freedland frozen the money, according to people familiar with the situation.
The move by the other lenders to freeze WorldCom's cash came after a heated, four-hour conference call Thursday. Though some considered it a sneak attack on WorldCom, the majority of the banks -- 25 of the 27 that provided the loan -- agreed to seek the restraining order.
J.P. Morgan Chase and Citigroup, which didn't join the effort, may have less reason to play hard ball, people familiar with the banks said. Both banks are believed to have reduced their exposure to their share of the $2.65 billion loan. The two also have close banking relationships with WorldCom. Citibank's Salomon Smith Barney unit and J.P. Morgan Chase served as lead underwriters of about $11.7 billion of WorldCom bonds issued last year.
Representatives for both banks declined to comment or were unavailable to comment. WorldCom spokesman Brad Burns declined to comment.
The other 25 banks, led by Deutsche Bank AG (Other OTC: DTBKY - News) , which provided about $2.5 billion of the $2.65 billion loan commitment, claim in court that WorldCom fraudulently obtained the money. "Every promise made that was the basis for funding that loan was false and fraudulent," said the banks' attorney Louis Kimmelman of New York law firm O'Melveny & Myers according to a court transcript.
Wall Street Journal Staff Reporter Carrick Mollenkamp contributed to this report. |
