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WorldCom May Write Down Assets

A decrease in demand has lowered the value of its communications networks, but the firm is awaiting an audit before setting a figure.

January 30, 2003|From Bloomberg News

Telecommunications company WorldCom Inc., which filed for bankruptcy protection last summer, may write off a "material" part of its $32 billion in property and equipment after waning demand reduced the value of communications networks.

WorldCom also said in a statement Wednesday that it had a net loss from continuing operations of $194 million in November, narrower than $205 million in October. It had $2.2 billion in sales, down from $2.3 billion, and boosted cash by $200 million to $2.3 billion.

"We're seeing continued overcapacity, businesses are holding back on spending, plus WorldCom is losing business customers," said Rick Tilton, chief executive of Greenacre Asset Advisors, which advises creditors of bankrupt companies.

New Chief Executive Michael Capellas plans for $9 billion of accounting restatements and for the firm to emerge from bankruptcy protection by the third quarter. WorldCom, built by former CEO Bernard Ebbers into the No. 2 U.S. long-distance carrier through acquisitions, filed for Chapter 11 reorganization in July after disclosing that it treated $3.85 billion in costs in 2001 and 2002 as capital investments, masking losses.

WorldCom, which reports monthly results to the U.S. Bankruptcy Court, is "trying to move closer to what is the real value of the assets in today's market," Tilton said.

The Clinton, Miss.-based firm wasn't more specific about the size of a property-asset write-down. The firm said that until an audit of reported asset values is finished, it can't determine the amount of any adjustments. WorldCom said in August that it would reevaluate the carrying value of existing property, plant and equipment.

A call to a spokeswoman wasn't returned.

WorldCom also reiterated that it may record expenses of about $50 billion to write off goodwill, the difference between an asset's purchase price and fair value, and other intangibles. The company didn't say when that would occur.

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