WorldCom Allowed to Borrow $1.1 Billion to Continue Operations
WorldCom originally was granted permission to borrow $750 million immediately after filing for bankruptcy in July, in the largest such case in U.S. history. At the time, WorldCom attorneys said the company might need to raise that limit to $2 billion to stay afloat.
But WorldCom attorneys said the company's measures to cut costs and reassure spooked customers have improved WorldCom's outlook, and the company's cash holdings have risen from $360 million in July to $1 billion now.
Consequently, Clinton, Miss.-based WorldCom decided that its total bankruptcy loans, known as debtor-in-possession financing, need only be $1.1 billion, attorney Marcia L. Goldstein said in federal bankruptcy court in Manhattan.
She said the biggest beneficiary would be WorldCom's MCI long-distance division, which is by far WorldCom's biggest user of cash as it tries to retain customers and seek new ones.
Bankruptcy Judge Arthur J. Gonzalez approved the financing agreement after hearing no objections from the main committee of WorldCom creditors and only technical quibbles from other creditors.
WorldCom will borrow the money from 'a syndicate of financial institutions' arranged by Salomon Smith Barney Inc., J.P. Morgan Securities Inc. and General Electric Capital Corp., according to the loan agreement.
WorldCom filed for bankruptcy after disclosing that it had improperly accounted for billions of dollars in order to disguise losses as profits, a scandal that has led to criminal charges against several former executives.
The amount of the misstated funds has been revised to $7.1 billion, and some reports have indicated the amount may go higher. WorldCom's new chief financial officer, John Dubel, declined to comment on that after Tuesday's court hearing.
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