CEO Predicts Fast WorldCom Recovery
Mon Jul 22,10:56 AM ET
By JIM KRANE, AP Technology Writer
NEW YORK (AP) - Just 12 hours after filing the largest bankruptcy in corporate history, WorldCom Inc.'s chastened but optimistic chief executive said the company hoped to emerge from court protection in under a year with a shrunken debt load and fewer peripheral assets.
"We fought hard and frantically to avoid this, but ultimately the board thought that taking this action was the best way to help the greatest number of people," WorldCom chief executive John Sidgmore said during a Monday morning press conference at the Hilton Hotel in midtown Manhattan. "Frankly, it became the only way to provide for our company's future."
Sidgmore said the company's staggering $30 billion debt load had forced it to seek Chapter 11 protection in federal bankruptcy court, and hoped a more "streamlined" and competitive company would emerge by the "first quarter of next year."
"We don't really believe our competitors would be smart to relax during this period," Sidgmore said.
The telecommunications giant filed for bankruptcy protection Sunday night, nearly four weeks after it disclosed almost $4 billion in deceptive accounting.
With $107 billion in assets reported in its filing, WorldCom's bankruptcy was twice as large as Enron's record-setting filing and four times as big as Global Crossing's in January.
Sidgmore said WorldCom hoped to emulate the successful emergence from bankruptcy protection of U.S. corporations such as Continental Airlines, Texaco, Federated Department Stores and Southland Corp.
Chapter 11 protection would allow WorldCom to operate its business as normal, paying employees and suppliers while providing service to its Internet access customers and the 20 million long-distance telephone subscribers of its MCI unit.
Sidgmore said the company had been assured up to $2 billion in emergency financing to help it with "cash flow problems" during the bankruptcy process.
Sidgmore said he hoped the court would reduce WorldCom's debt load by "three-fourths," which would ease its $2 billion in yearly debt-service payments.
The company's international operations are not affected by the filing, he noted.
Sidgmore agreed with a reporter's assessment that just nine to 12 months would be a short period to close the country's largest-ever bankruptcy, saying progress depended on the findings of a bankruptcy judge and on the completion of an internal audit of the company's books, now being performed by accountancy KPMG.
While this is not the path we wanted to take, we think its clearly the right thing for our future," he said.
Sidgmore also announced the election of two new members to WorldCom's board of directors, former U.S. Attorney General Nicholas Katzenbach and Dennis Beresford, an accounting professor at the University of Georgia.
FCC ( news - web sites) chairman Michael K. Powell said he believed the bankruptcy wouldn't lead to "an immediate disruption of service to consumers or threaten the operation of WorldCom's Internet backbone facilities."
Drake Johnstone, a telecom analyst with Davenport & Co. in Richmond, Va., said the hope among the banks providing the new money is that WorldCom will be able to restructure its debt and emerge from Chapter 11 as a viable enterprise.
"My concern with that scenario is it's unclear what other surprises WorldCom has in store," Johnstone said. "The (internal) audit is not complete. At this point we don't know how much revenue or cash flow the company has."
Sidgmore said the company will look at selling some of its noncore assets, and that "potentially includes some of our Latin American facilities" and wireless resale business. "Certainly not UUNET or MCI or any of the core assets."
UUNET owns and runs some of the Internet's biggest thoroughfares in the United States while MCI is the company's core long distance business.
The deceptive accounting, investigations and collapse of WorldCom follow costly scandals at other big-name companies, including Adelphia Communications, Global Crossing and Enron, all of which have filed for bankruptcy protection as they attempt to pay creditors and reorganize their businesses.
Sidgmore said WorldCom is cooperating with investigators to "help them find the bad guys, punish the bad guys and leave the company alone."
WorldCom's filing detailed liabilities totaling more than $65 billion.
Clinton, Miss.-based WorldCom admitted June 25 that it falsely accounted for $3.85 billion in expenses, which had the effect of inflating profits. That same day, it fired chief financial officer Scott Sullivan, who was subsequently accused by the company's auditor, Arthur Andersen, of withholding crucial information about WorldCom's bookkeeping.
WorldCom also announced in June that it would lay off 17,000 workers, or 20 percent of its global work force.
In an interview on NBC's "Today" show, Sidgmore said the company had no plans to lay off more staff. He also acknowledged that it sounded "outrageous" that senior managers such as former chief executive Bernie Ebbers claimed to have no knowledge of the accounting improprieties.
Even before the hidden expenses were exposed, WorldCom was engulfed in financial turmoil.
WorldCom's stock price traded as high as $64.50 in June 1999. However, shares of WorldCom and other telecommunications companies have slid ever since as the dot-com bubble burst and other market forces caused an industrywide implosion.
The high-speed Internet infrastructure that telecom companies had been building — and hyping — throughout the late 1990s lost much of its value very quickly once it became apparent there was little consumer demand for the services being offered over this so-called broadband network.
The long-distance sector, meanwhile, has been pounded by falling rates and growing competition from local Baby Bells, who have received federal permission to hone in on the market. Long-distance carriers such as WorldCom's MCI are also losing business as customers grow fond of e-mail and cell phones.
In March, the SEC launched a wide-ranging investigation into WorldCom that included a review of $408 million in loans made to Ebbers. WorldCom stockholders sued the company's board over those loans.
A month later, Ebbers resigned amid mounting concerns about the loans and the purported growth and financial health of the company he founded in 1983. He was replaced by Sidgmore, whose plan to restructure the company by cutting costs and selling assets will now take place through the bankruptcy process.
___
On the Net:
WorldCom: wcom.com
U.S. Bankruptcy Court, Southern District of New York: ecf.nysb.uscourts.gov
story.news.yahoo.com |
