The nation’s largest bankruptcy filing could be on its way to resolution after WorldCom agreed to pay $385 million more to address some of the biggest roadblocks it had faced in reemerging from bankruptcy.
Under the terns of the agreement reached this week, two groups that had been set to receive nothing under an earlier deal, will now receive some compensation for their losses. Trade creditors will now receive 52 cents on the dollar, as opposed to the original offering of 36 cents on the dollar. Holders of MCI junior debt instruments, slated to receive nothing under the first deal, will now get 44.5 cents on the dollar.
WorldCom, which is changing its name to MCI, is expected to emerge from bankruptcy by the end of this year or early next year despite competitors claims of improper call routing and criminal charges pending in Oklahoma and potentially Massachusetts. The nation’s second largest long distance company filed the largest Chapter 11 in history just over a year ago.
Most of the company’s creditors had approved the earlier plan but the two groups compensated in this week’s deal had objected and posed serious obstacles to solvency. Under this new pact, WorldCom will erase most of its debt and be left with $4.6 billion in cash.
"This settlement is a small price to pay to emerge from bankruptcy as soon as possible," Pat Comack, an analyst at Miami investment bank Guzman & Co., who has a ‘sell’ rating on the company, told Bloomberg News. "It looks like full steam ahead in terms of them emerging from bankruptcy."
U.S. Bankruptcy Judge Arthur Gonzalez had adjourned a hearing on the WorldCom case to allow the parties to work out a settlement, which was reportedly reached at 3:45 a.m. Tuesday morning. Chief Executive Michael Capellas, who was en route to Washington, returned to New York to help close the deal.