- News>
- ICE Economy
WorldCom files for bankruptcy, largest in US history
New York, July 22: WorldCom filed for bankruptcy protection on Sunday, four weeks after the telecommunications giant disclosed nearly $4 billion in deceptive accounting.
New York, July 22: WorldCom filed for bankruptcy protection on Sunday, four weeks after the telecommunications giant disclosed nearly $4 billion in deceptive accounting.
The filing, which had been expected, is the latest in a stunning series of corporate collapses and the biggest bankruptcy in US history. WorldCom chief executive John Sidgmore said his company had negotatiated approximately $2 billion in financing while it reorganises. The company, which is hiring a restructuring team to ease the process, hopes to emerge from bankruptcy in 12 months.
He said the bankruptcy should have no effect on the company's customers - from long-distance users to corporate data users. "At the end of the day, this really will be business as usual," he said.
"We don't think that there will be any significant impact on the employees and vendors, for that matter, and we should have plenty of cash to make it." Sidgmore said the company will look at selling some of its noncore assets, and that "potentially includes some of our Latin American facilities" and wireless resale business. "Certainly not UUNet or MCI or any of the core assets."
UUNET owns and runs some of the Internet's biggest thoroughfares in the United States while MCI is the company's core long distance business. He said the bankruptcy won't include the company's international operations.
The deceptive accounting, investigations and collapse of WorldCom follow costly scandals at other big-name companies, including Adelphia Communications, Global Crossing and Enron, all of which have filed for bankruptcy protection as they attempt to pay creditors and reorganize their businesses.
With more than $100-billion in assets reported at the end of March, a WorldCom bankruptcy would be twice as large as Enron's record-setting filing and four times as big as Global Crossing's in January. In Washington, Federal Communications Commission spokesman David Fiske said the commission "is staying in touch with the WorldCom situation very closely and will be using the full extent of its statuary authority to protect consumers against any abrupt termination of service and to protect the integrity of the telecommunications network."
Clinton, Mississippi-based WorldCom admitted June 25 that it falsely accounted for $3.85 billion in expenses, which had the effect of inflating profits. That same day, it fired chief financial officer Scott Sullivan, who was subsequently accused by the company's auditor,
Arthur Andersen, of withholding crucial information about WorldCom's bookkeeping. WorldCom also announced that it would lay off 17,000 workers, or 20 per cent of its global work force.
Even before the hidden expenses were exposed, WorldCom was engulfed in financial turmoil. WorldCom's stock price traded as high as $64.50 in June 1999.
However, shares of WorldCom and other telecommunications companies have slid ever since as the dot-com bubble burst and other market forces caused an industrywide implosion.
The high-speed Internet infrastructure that telecom companies had been building - and hyping - throughout the late 1990s lost much of its value very quickly once it became apparent there was little consumer demand for the services being offered over this so-called broadband network.
The long-distance sector, meanwhile, has been pounded by falling rates and growing competition from local Baby Bells, who have received federal permission to hone in on the market. Long-distance carriers such as WorldCom's MCI are also losing business as customers grow fond of e-mail and cell phones.
Bureau Report
The filing, which had been expected, is the latest in a stunning series of corporate collapses and the biggest bankruptcy in US history. WorldCom chief executive John Sidgmore said his company had negotatiated approximately $2 billion in financing while it reorganises. The company, which is hiring a restructuring team to ease the process, hopes to emerge from bankruptcy in 12 months.
He said the bankruptcy should have no effect on the company's customers - from long-distance users to corporate data users. "At the end of the day, this really will be business as usual," he said.
"We don't think that there will be any significant impact on the employees and vendors, for that matter, and we should have plenty of cash to make it." Sidgmore said the company will look at selling some of its noncore assets, and that "potentially includes some of our Latin American facilities" and wireless resale business. "Certainly not UUNet or MCI or any of the core assets."
UUNET owns and runs some of the Internet's biggest thoroughfares in the United States while MCI is the company's core long distance business. He said the bankruptcy won't include the company's international operations.
The deceptive accounting, investigations and collapse of WorldCom follow costly scandals at other big-name companies, including Adelphia Communications, Global Crossing and Enron, all of which have filed for bankruptcy protection as they attempt to pay creditors and reorganize their businesses.
With more than $100-billion in assets reported at the end of March, a WorldCom bankruptcy would be twice as large as Enron's record-setting filing and four times as big as Global Crossing's in January. In Washington, Federal Communications Commission spokesman David Fiske said the commission "is staying in touch with the WorldCom situation very closely and will be using the full extent of its statuary authority to protect consumers against any abrupt termination of service and to protect the integrity of the telecommunications network."
Clinton, Mississippi-based WorldCom admitted June 25 that it falsely accounted for $3.85 billion in expenses, which had the effect of inflating profits. That same day, it fired chief financial officer Scott Sullivan, who was subsequently accused by the company's auditor,
Arthur Andersen, of withholding crucial information about WorldCom's bookkeeping. WorldCom also announced that it would lay off 17,000 workers, or 20 per cent of its global work force.
Even before the hidden expenses were exposed, WorldCom was engulfed in financial turmoil. WorldCom's stock price traded as high as $64.50 in June 1999.
However, shares of WorldCom and other telecommunications companies have slid ever since as the dot-com bubble burst and other market forces caused an industrywide implosion.
The high-speed Internet infrastructure that telecom companies had been building - and hyping - throughout the late 1990s lost much of its value very quickly once it became apparent there was little consumer demand for the services being offered over this so-called broadband network.
The long-distance sector, meanwhile, has been pounded by falling rates and growing competition from local Baby Bells, who have received federal permission to hone in on the market. Long-distance carriers such as WorldCom's MCI are also losing business as customers grow fond of e-mail and cell phones.
Bureau Report