MCI's Reorganization Plan Gains Key Approval
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Major creditors of bankrupt telecom MCI, formerly known as WorldCom, have voted to approve a reorganization plan for the company, as it prepares for a series of hearings next week to gain court approval.
In a bankruptcy court filing made public Thursday, a group of creditors, which collectively hold an estimated 90 percent of the claims in the case, have approved of MCI's plan to emerge from bankruptcy.
That includes emerging from bankruptcy with bank and bond debt at between $4.5 billion and $5.5 billion from the $30 billion in bank and bond debt that the company brought to its bankruptcy filing. All told, MCI's total debt was estimated at over $41 billion by the time it filed for protection from creditors in July of 2002, as details of an accounting scandal were starting to unravel. To date the company's accounting fraud total has reached $11 billion.
In addition, creditor committees that are parties in the case are seeking to suspend a federal investigation of charges from other telcos that the company engaged in a call-routing scheme in order to avoid paying inter-connect charges to other phone service providers, notably AT&T.
In a civil complaint announced Tuesday, AT&T claimed it suffered damages as a result of an alleged "fraudulent call-routing scheme that is fundamentally different from, and bears no relation to, legitimate routing practices widely employed in the telecommunications industry." AT&T said it filed its charges as the result of a grand jury investigation into MCI's alleged call-routing practices.
In addition, the creditors committee is looking to stall contentions over the reorganization plan as well as hold off on the call-routing probe.
"The public nature of the chapter 11 process, which provides the Debtors' competitors with easy access to a forum in which they can publicly besmirch the Debtors, necessitates the Debtors' swift emergence from chapter 11," the filing said.
Indeed, MCI's plans to emerge from bankruptcy protection nearly debt-free has raised the ire of rivals and state prosecutors, who have objected to a plan that essentially enables the company to leave a massive accounting scandal behind it.
But the creditors, who hold as much as $23 billion worth of MCI's debt, said the reorganization plan allows creditors to realize the highest possible recoveries under the circumstances "through a distribution of nearly $16 billion in value -- many times the distributable value if [MCI] were to be liquidated."
Hearings on gaining approval for the bankruptcy plan are set to begin in New York on Monday.
Corrects prior version's incorrect reference to debtors in second graph