It will probably have another pop when they actually file for bankruptcy protection and announce their DIP financing.
WorldCom Said Close to DIP Financing Pact
Mon Jul 15, 1:19 PM ET
By Jessica Hall
story.news.yahoo.com
PHILADELPHIA (Reuters) - WorldCom Inc. , the telecommunications group at the center of a massive accounting scandal, on Monday moved to finalize a debtor-in-possession funding pact that would give it money to operate under a possible bankruptcy reorganization, sources familiar with the situation said.
With the threat of Chapter 11 bankruptcy looming, WorldCom aims to secure a DIP funding agreement from Citigroup Inc. , J.P. Morgan Chase & Co. and General Electric Co.'s GE Capital financing arm, sources said.
That money would allow the No. 2 U.S. telephone and data services company to maintain its networks, serve customers and pay employees during the protracted bankruptcy process.
Representatives from WorldCom, Citigroup, J.P. Morgan and GE Capital declined to comment.
The DIP funding talks come as WorldCom faces a crucial decision on Tuesday by the New York Supreme Court, which will consider a request by several WorldCom lenders that want to prevent the telephone company from spending money it was loaned in May.
Twenty five of the 27 banks that provided WorldCom with the $2.65 billion loan contended that WorldCom fraudulently obtained the loan because its accounting errors masked its true financial health, sources said.
If the judge rules in favor of the banks -- and prevents WorldCom from spending the $2.65 billion -- the company will be left with minimal funds and will be forced to file for bankruptcy immediately, the sources said.
A bankruptcy filing by WorldCom, which has $104 billion in assets, would eclipse the Chapter 11 filing by collapsed energy trader Enron Corp. as the nation's largest insolvency.
The Clinton, Mississippi-based company, which has about $30 billion in "junk-rated" debt and $2.3 billion in cash, is trying to prepare for all contingencies.
WorldCom remains in talks with its traditional lenders and another unknown investor to secure $3 billion in new financing that could help it delay or avoid bankruptcy. But those talks have taken a back seat to the negotiations for DIP funding, one source familiar with the situation said.
Several bondholders also contacted the company regarding a debt-for-equity swap that would be part of a "pre-packaged" bankruptcy filing, the company previously said.
WorldCom is being sued in New York by the Securities and Exchange Commission ( news - web sites), which alleges it improperly booked expenses as capital spending for five quarters starting in 2001, hiding losses of $1.22 billion. It is also the focus of probes by the Department of Justice ( news - web sites) and the U.S. Congress.
(Additional reporting by Tom Johnson in New York) |
