MCI Re-org Wins Court Approval
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MCI's reorganization plan has won court approval, clearing the way for the Ashburn, Va., telecom giant to emerge from Chapter 11 bankruptcy protection.
"We have reached our confirmation faster than anyone expected," said chairman and CEO Michael D. Capellas, who took on the task of rehabilitiating MIC after holding the top job at Compaq.
The decision came late Friday from U.S. Bankruptcy Court Judge Arthur J. Gonzales. It allows the nation's second-largest long-distance carrier, formerly known as WorldCom, to shed most of its debt.
MCI is expected to emerge from Chapter 11 protection around the first of the year. When it does it will have a balance sheet of 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 to financial obligations, MCI's plan contained a slew of organizational and procedural requirements aimed at preventing any future fraud.
Richard Breeden, a former SEC official assigned to put MCI back on ethical footing, said a weak board contributed to WorldCom's downfall.
WorldCom directors, who gradually ceded power to CEO Bernie Ebbers and overlooked or ignored fraud of historic proportions, Breeden said. Few could claim to be independent, he said. One was apparently only inserted in the post because he was Ebbers' neighbor.
The emergence of MCI will put pressure on rival AT&T. AT&T recently dropped its objections to MCI's reorganization plan but it is still pursuing fraud charges related to MCI's method of routing calls.