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WorldCom's Creditors Back Restructuring Plan

The proposal turns over company ownership. Also, a committee agrees not to probe rivals over call-routing allegations.

September 05, 2003|From Bloomberg News

Creditors of WorldCom Inc., the second-biggest U.S. long-distance telephone company, approved the carrier's plan to exit the largest bankruptcy filing in history.

The plan slashes debt and hands ownership of the company to creditors. Among the creditors who voted, 97% -- representing $21 billion of debt -- supported the proposal, the company said in a court filing Aug. 29.

Ashburn, Va.-based WorldCom, which is changing its name to MCI, needed approval from two-thirds of each of its eight creditor classes.

Bankruptcy Judge Arthur Gonzalez in New York will weigh the plan at hearings beginning Monday.

Competitors have challenged WorldCom's bid to exit bankruptcy protection by October after the company's $11-billion accounting fraud and new allegations of illegal call routing. AT&T Corp., SBC Communications Inc. and Verizon Communications Inc. accuse WorldCom of fraudulently routing telephone calls through Canada to avoid paying connection fees.

The main class of WorldCom creditors would get 36 cents on the dollar under the restructuring. The bonds trade at about 30 cents. The company's shares, once worth as much as $200 billion, would be wiped out.

Meanwhile, WorldCom's creditor committee agreed to suspend a bid to investigate the competitors who accuse it of illegally routing calls.

The Justice Department is probing allegations that WorldCom illegally skirted network-access fees. The U.S. attorney in New York had asked the creditors not to pursue their request to a bankruptcy judge because it might interfere with the probe.

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