- Operations to continue normally
- Filing does not apply to non-U.S. entities
22 July 2002 -- WorldCom, Inc., Clinton, Mississippi, yesterday announced that the company its active US subsidiaries have filed voluntary petitions for reorganisation under Chapter 11 of the U.S. Bankruptcy Code in New York.
Chapter 11 allows a company to continue operating in the ordinary course of business and to maximise recovery for the company's stakeholders. The filings will enable the company to continue to conduct business as usual while it develops a reorganisation plan. The move follows the company's disclosure last month of a USD4bn accounting fraud and now means the cash-strapped group has protection from creditors.
WorldCom's non-U.S. subsidiaries are not included in the filing and will also continue to operate normally.
WorldCom also announced that it has obtained an agreement to arrange up to USD2bn in Debtor-in-Possession (DIP) financing. The company already has secured a commitment of USD750m of this amount from Citibank, N.A., JP Morgan Chase Bank and General Electric Capital Corporation. The facility will be used to supplement the company's cash flow during the Chapter 11 proceedings.
Once approved, the arrangement will provide an immediate source of funds to WorldCom, allowing the company to operate its business normally while it focuses on its new strategic plan, restructures its finances, reduces its debt burden and strengthens its balance sheet.
This additional liquidity will enable the company to satisfy customary obligations associated with the daily operations of its business, including the timely payment for new services, employee wages and other obligations.
"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," said John Sidgmore, president and chief executive officer of WorldCom. "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."
WorldCom currently employs more than 60,000 people in 65 countries and serves over 20m residential and business customers. It also operates the world's largest Internet network.
WorldCom also announced the election of two new members to its Board of Directors; Nicholas deB. Katzenbach and Dennis R. Beresford. Mr. Katzenbach currently is a private attorney and previously served as Attorney General of the United States (1965-66), Under Secretary of State for the United States (1966-69), and as Senior Vice President and General Counsel of IBM Corporation (1969-86).
Mr. Beresford currently is Professor of Accounting at the Terry College of Business, University of Georgia and previously served as Chairman of the Financial Accounting Standards Board (1987-97). Mr. Katzenbach and Mr. Beresford have not previously been involved in the company's affairs.
"The additional board members of this calibre demonstrate our seriousness in attracting independent board members and establishing a quality governance structure for our corporation. Their willingness to serve is also an indication of the importance of our company's future," said Sidgmore.