Telecommunications giant WorldCom -- faced with a mountain of debt and a growing scandal over accounting irregularities -- filed for bankruptcy protection in the largest corporate failure in US history.
WorldCom filed for protection under Chapter 11 of the US bankruptcy code, which allows it to continue operating while it works out a plan to pay its debts.
"Chapter 11 enables us to create the greatest possible value for our creditors, preserve jobs for our employees, continue to deliver top-quality service to our customers and maintain our role in America's national security," WorldCom president and chief executive officer John Sidgmore said in a statement.
"We will use this time under reorganization to regain our financial health and focus, while operating with the highest integrity. We will emerge from Chapter 11 as quickly as possible and with our competitive spirit intact," Sidgmore said.
Sidgmore has planned a press conference at 9am yesterday in New York hotel to discuss the bankruptcy filing by the Clinton, Mississippi-based company.
WorldCom, the nation's second-largest long-distance telephone service provider, admitted in late June it had improperly accounted for US$3.9 billion in operating expenses over more than a year to hide losses.
Phone and Internet service to the company's more than 20 million customers is expected to continue uninterrupted, officials said.
The filing, which followed a meeting of company directors, would far eclipse the December 2001 collapse of energy trading giant Enron.
In the bankruptcy petition, WorldCom listed assets of US$107 billion as of March 31, against debts of US$41 billion.
By comparison, Enron listed US$63.4 billion in assets when it sought bankruptcy protection in December, sinking in a morass of accounting scandals.
Proper accounting would have forced WorldCom to report a net loss last year and for the first quarter of this year, the company admitted in late June.
Instead, WorldCom claimed profits of US$1.4 billion last year and US$130 million for the first quarter of this year. Final numbers for those five quarters are awaiting another audit.
The company intends to restructure its debt, sell off non-core assets and focus on key businesses, the Wall Street Journal reported in its online edition.
In connection with the bankruptcy filing, WorldCom, MCI and their affiliates announced they have received up to US$2 billion in new secured financing from JPMorganChase Bank, Citibank, and GE Capital Corp.
Together with cash generated from ongoing operations, the funds will be more than sufficient to restructure and emerge from bankruptcy intact, the companies reassured the public.
"Our time frame is to be through the bankruptcy process in nine to 12 months," said WorldCom spokesman Brad Burns.
Sidgmore warned earlier that his company's survival is in the public interest and a matter of "national security," noting that his company "plays an important role in America's telecommunications infrastructure," with some 20 million telephone customers, and is the largest Internet carrier in the world.
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