CLINTON, Miss. (AP) – WorldCom Inc., trying to emerge from the largest-ever U.S. bankruptcy, unveiled a reorganization plan Monday that erases most of its debt, renames the company and moves its headquarters.
WorldCom said it will take the name of its long-distance unit MCI, and shift its headquarters to MCI’s base in the Washington suburb of Ashburn, Va., from Clinton, Miss., where it was founded by former CEO Bernard Ebbers.
WorldCom filed for bankruptcy protection in July and has admitted to accounting fraud that could top $11 billion. It was one of several high-profile companies to falter last year under the weight of accounting scandals.
WorldCom would shed about $36 billion of its $41 billion in debt under the regorganization plan. The plan has the backing of 90 percent of its creditors – which should ensure that the plan wins court approval.
Rivals like AT&T Corp. and SBC Communications Inc. have balked at allowing WorldCom to shed its debts, as they would face a leaner competitor eager to aggressively recoup lost marketshare. WorldCom has already used the bankruptcy to shed or reduce the size of work contracts and to write down $10 billion in assets.
“Going through bankruptcy suddenly gives WorldCom a cost advantage – they come out of this much better than they went into it,” said Frank Dzubeck, a telecom consultant and president of Communications Network Architects in Washington, D.C.
Under the plan, WorldCom would have debts of between $3.5 billion and $4.5 billion and available cash of about $3 billion. Its stocks and bonds would have a market value of about $12 billion – a far cry from the company that claimed $104 billion in assets a year ago before details of its accounting fraud began to emerge.
WorldCom could emerge from Chapter 11 bankruptcy as early as September.
In the meantime, Worldcom can’t legally change its name. However, WorldCom’s Web site as of Monday redirects visitors to MCI.com., and company news releases about the reorganization plan refer to Michael Capellas as chairman and CEO of MCI, not WorldCom.
Capellas addressed WorldCom’s 55,000 employees via Webcast from Ashburn Monday. He tried both to make employees feel good about the company’s progress since the July bankruptcy filing and to warn them that more needs to be done.
“It’s the end of our 100-day plan but the first day of our three year plan,” said Capellas, a former chief executive of Compaq Computer Corp. who took the helm at WorldCom in December. “We have to ensure we maintain profitability.”
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