WorldCom's Sidgmore Says Bankruptcy Won't Interrupt Telecom Services

WorldCom

WorldCom President and CEO John Sidgmore said the filing, announced Sunday, will help the company manage accelerating creditor claims associated with mounting debts and charges of accounting misconduct.

"Under Chapter 11 we will be able to operate our business under the normal [conditions, continue to pay our employees, provide service to our customers, pay our suppliers for their services and work with our creditors," he said during a morning press conference here today.

The filing, which allows the company to reorganize its more than $30 billion in debt while being protected from creditors, will significantly reduce the unwieldy interested payments that were dogging any turnaround attempt, Sidgmore added.

FCC Chairman Michael Powell also weighed in on the issue Sunday, promising to "intervene in bankruptcy proceedings as necessary to ensure that the bankruptcy court is aware of and considers our public interest concerns."

WorldCom manages the nation's largest Internet backbone and provides services to many government agencies.

"I want to assure the public that we do not believe this bankruptcy filing will lead to an immediate disruption of service to consumers or threaten the operation of WorldCom's Internet backbone facilities," Powell said.

WorldCom announced on Sunday it has arranged up to $2 billion in Debtor-In-Possession (DIP) financing from several lenders to allow the company to operate normally while it focuses on a new strategic plan and restructures its finances. Of the $2 billion, $750 million has already been secured from Citibank, JP Morgan Chase Bank and General Electric Capital Markets Group.

During the press conference Sidgmore said he will work to preserve key assets at WorldCom. Although the company has previously announced plans to shed some units, such as its floundering wireless business, Sidgmore intends to hold onto data services vital to solution providers.

"Our plan will [leave the centerpieces at WorldCom intact,UUNET, long distance and the data business around the world," he said. "The reorganization is not going to be 'jump in and sell off all the assets,' in my opinion, although the creditors may feel differently."

At the press conference, Sidgmore announce two new board members, who will replace former CEO Bernie Ebbers and CFO Scott Sullivan, both implicated in the ongoing accounting investigation.

Nicholas Katzenbach, a former Attorney General of the Unites States and general counsel of IBM, and Dennis Beresford, professor of accounting at Terry College of Business at the University of Georgia and formerly the chairman of the Financial Accounting Standards Board, will help with the auditing investigation, Sidgmore said.

KPMG is currently completing a WorldCom audit, which Sidgmore said he hopes will be completed by the first quarter. The reorganization period could take 12 to nine months "but could be longer," Sidgmore acknowledged, when it was suggested by one reporter that bankruptcies of WorldCom's magnitude could take twice as long to complete.

Sidgmore added that it is unlikely WorldCom will report earnings as scheduled on Thursday. Additionally, he said the company does not immediately foresee layoffs as a result of the Chapter 11 filing.