WorldCom Inc's creditors may force the company to sell its most profitable assets after the telephone and Internet carrier said it had US$7.18 billion in accounting irregularities, bankruptcy attorneys said.
"As confidence evaporates, it becomes more likely that the best way to restructure this company is to sell off the assets," said David Green, an attorney at law firm Salomon Green & Ostrow, which specializes in bankruptcy. "It becomes a question of people getting more nervous and distrustful of WorldCom."
WorldCom, and carrier of half of all Internet traffic, has said it could emerge from Chapter 11 mostly intact by January.
The company filed the largest US bankruptcy last month after revealing it hid US$3.85 billion in expenses and masked losses since last year. WorldCom disclosed US$3.33 billion in financial misstatements last night.
"I'm sure financial creditors would want to sell the whole company, take the money and go home," said Leonard Goldberger, a bankruptcy attorney at White & Williams LP and vice president of the American Bankruptcy Institute.
"Creditors who are suppliers would want to see the company continue operating because they want to continue selling their products to them."
Any decision to dismantle WorldCom by selling off its largest assets will be made by the creditor's committee, composed of banks, bondholders and suppliers owed money by the company.
Creditors will get the most return if the company emerges from Chapter 11 proceedings intact, said Daniel Golden of Akin, Gump, Strauss, Hauer & Feld, who represents WorldCom's creditor committee in the bankruptcy case.
Golden said WorldCom and the committee would look to sell some assets and that WorldCom risked losing the trust of some customers after its latest restatement. "Anytime you have an accounting restatement, there's an issue of the loss of confidence by customers," he said.
"There may be clearly be some assets that the company and the committee may decide to sell," Golden said.
WorldCom Chief Executive John Sidgmore has said the company doesn't plan to liquidate its largest assets, including the MCI Group long-distance business and the Uunet worldwide data network.
The company will try to sell small operations such as wireless-resale assets and holdings in Latin America and Europe, he said.
WorldCom is "still serving customers and this is not going to impact the high quality service that they receive from WorldCom. Our new management is committed to restructuring the company and emerging from bankruptcy," spokeswoman Sudie Nolan said.
The stock, delisted by the NASDAQ Stock Market last month, has tumbled from a high of US$62 in June 1999, wiping out more than US$100 billion in market value.
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