MCI could recover from the world's biggest bankruptcy

MCI, formerly known as WorldCom, could emerge from the world's biggest bankruptcy as early as mid-October after striking a deal with two key groups of creditors who had been opposing the firm's restructuring plan.

Marcia Goldstein, one of the bankruptcy lawyers for MCI, said the deals "eliminate the two most extensive objections" to the company's plan.

US bankruptcy judge Arthur Gonzalez has adjourned a hearing on the proposals until this afternoon to allow the two sides to work through the agreement and for MCI to resubmit its refined plan.

Under the accords, one set of creditors will receive US$0.52 on the dollar against the original proposal of US$0.36. Another set of bondholders who had been left out of the proposals entirely will now be paid US$0.445 per dollar. The agreements were sealed after talks that went on until Tuesday morning.

Michael Capellas, MCI's chairman and chief executive, said the settlement means the company "has cleared one of the last major hurdles along its path toward emergence" from bankruptcy.

The re-emergence of MCI would be a stunning act of survival. The company, then still known as WorldCom, filed for bankruptcy more than a year ago with debts of US$41 billion following the discovery of a massive alleged accounting fraud.

Several former WorldCom executives are facing criminal charges for the alleged fraud, which left an US$11 billion hole in the company's books.