Will WCOM or MIC be a buy when it emerges from BK?:
WorldCom Files Reorganization Plan
Monday April 14, 10:06 am ET
By Jessica Hall
PHILADELPHIA (Reuters) - WorldCom Inc. (Other OTC:WCOEQ.PK - News; Other OTC:MCWEQ.PK -
News) said on Monday it aims to exit bankruptcy with a different name, a new chief financial officer and a
fraction of its former debt load under a plan giving creditors control of the telephone and data services company.
WorldCom, which last year filed the world's
largest bankruptcy case in the wake of an
accounting scandal that may top $11 billion,
named Robert Blakely as CFO. Blakely, 61,
previously held that position at Lyondell
Chemical (NYSE:LYO - News) and the former
Tenneco Inc.
WorldCom, the second-largest U.S.
long-distance and data services company behind
AT&T Corp. (NYSE:T - News), said it would
dump its tarnished name and adopt MCI, the
brand of its residential long-distance telephone
business, as its new moniker.
The company, which also will shift its
headquarters to Ashburn, Virginia, from Clinton,
Mississippi, said the reorganization plan calls
for it to pare its debt load to between $3.5
billion and $4.5 billion, and gives it a $1 billion cash cushion.
WorldCom, which in its heyday transmitted roughly half of the world's Internet traffic, buckled under $41 billion
in debt and a growing accounting scandal when it filed for bankruptcy in July 2002.
Since then, WorldCom, Enron Corp. (Other OTC:ENRNQ.PK - News) and Adelphia Communications Corp.
(Other OTC:ADELQ.PK - News) have come to personify the storm of allegations surrounding corporate
accounting practices and ethics.
WorldCom's reorganization plan, which has the backing of roughly 90 percent of the company's creditors, will
allow the company to be profitable when it emerges from bankruptcy later this year.
WorldCom will exit bankruptcy, pending court approval, as the entire long-distance industry struggles with slack
customer demand and increased competition from the Baby Bells and wireless telephone companies.
CREDITORS ON BOARD
Under the reorganization plan, holders of WorldCom bonds would get about 36 cents on the dollar for their $26
billion in notes. The MCI creditors, which owned $3 billion on bonds, would get 80 cents on the dollar, while
Intermedia creditors will get about 94 cents on the dollar for roughly $1 billion in bonds.
Stockholders would get nothing.
Starting on Monday, the company will launch an advertising campaign on U.S. television and in the print and
online media in the United States, Europe and the Asia-Pacific region.
Changing the name to MCI, the long-distance telephone company WorldCom acquired in 1998, may help it
distance itself from its former management, led by Bernie Ebbers, the cowboy-boot-wearing executive who built
the company through more than 60 acquisitions.
There is some precedent to changing a corporate name to wipe away bad memories. Discount airline ValueJet
changed its name to AirTran after its 1996 plane crash in Florida killed 110 people.
RESTRUCTURING VETERAN BECOMES CFO
The appointment of Blakely as CFO is part of the clean sweep WorldCom has made of its board and top
management. The company has filled its executive suite with telecom-industry outsiders, including Michael
Capellas, former president of computer maker Hewlett-Packard Co. (NYSE:HPQ - News), who became chairman
and CEO in December.
Blakely retired as CFO of Lyondell Chemical last June, but he is most widely known for helping to restructure the
former Tenneco Inc., which had businesses including energy, shipbuilding and packaging.
At Tenneco, Blakely spearheaded a restructuring that pruned the unwieldy conglomerate, swollen with $11 billion
of debt and a mix of mostly unprofitable businesses, into a leaner company through spinoffs and asset sales. He
also has Wall Street experience, having spent 11 years Morgan Stanley & Co. as head of the bank's energy group.
As a "leaner, stronger competitor," WorldCom said it would have a new emphasis on small and mid-size business
customers and local telephone service. It also will widen the use of Internet technology to transmit voice traffic,
and help corporate customers integrate complex voice and data networks, rather than selling services as
stand-alone products.
WorldCom's sales have been falling each month since its Chapter 11 bankruptcy filing in July, putting it on track
for an annualized revenue drop of about 26 percent.
The company expects revenue of $24.7 billion in 2003, with growth of 4.5 percent in 2004 and 7 percent in 2005,
according to its three-year business plan.
Rivals such as AT&T and Sprint Corp. (NYSE:FON - News; NYSE:PCS - News) have claimed they are winning
contracts and market share as corporate customers pare their business with WorldCom. But WorldCom has
contended it has maintained its relationship with its top 200 customers. |
