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MCI emerges from bankruptcy
Long-distance carrier has cut debt by $36B; says it's distributing securities, cash to creditors.
April 20, 2004: 10:17 AM EDT

NEW YORK (CNN/Money) - MCI Inc., the long-distance phone service provider, emerged from the largest Chapter 11 bankruptcy in U.S. history Tuesday, saying it has begun distributing securities and cash to its creditors.

MCI, formerly known as WorldCom, has shed $36 billion in debt, along with the management that has been held responsible for an accounting scandal that nearly toppled the company. The company filed for bankruptcy protection in July 2002 a couple of weeks after revealing that $3.8 billion in expenses had been improperly booked by the company.

"We are emerging with a new board and management team, a sound financial position, unmatched global assets, a strong customer base and industry-leading service quality," MCI president and CEO Michael Capellas said in a statement.

Capellas told Reuters the long-distance giant will target wireless and data services to businesses as it rebuilds.

Capellas, the former president of Hewlett-Packard, said the company will remain competitive in the consumer telephone market, and has plans to develop an Internet phone service for consumers. But Capellas also said the company faces a tough year, and declined to say when MCI might reverse a trend of declining revenue.

"We're coming out of bankruptcy with an awfully good set of assets," Capellas said in the interview with the wire service. "As the industry shifts away from the notion of a phone call is a phone call and data is data... we have a great opportunity to play in that evolution."

The company said in the upcoming weeks and months it will roll out new products and services, as well as announce several new partnerships.

"Our emergence is not the finish line, it's the beginning of a new race," said Capellas. "Somewhere between telecommunications and computing there's a new kind of company, and that's what MCI will be."

MCI has about 20 million customers and is the second-largest U.S. long-distance provider behind AT&T Corp. (T: Research, Estimates) Less than 20 percent of its revenue comes from consumers, with much of the remainder coming from large businesses and the U.S. government.

The revamped MCI will emerge from bankruptcy with about $5 billion in debt and more than $6 billion in cash, giving it a stronger position than many of its competitors wanted it to have after the WorldCom scandal. Some fear that MCI could start a new price war, hitting the recently recovering telecom sector.

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The end of the bankruptcy protections comes seven weeks after WorldCom founder and former Chairman and CEO Bernard Ebbers, along with former Chief Financial Officer Scott Sullivan, were indicted on charges of making false statements to investors and a false filing with the Securities and Exchange Commission. Ebbers was forced out of the company before the accounting problem was revealed on June 25, 2002, while Sullivan was fired that day.

New shares of MCI will begin trading on the Nasdaq once the company satisfies the exchange's listing requirements, which should be within a few weeks. Existing MCI shares that trade on the Pink Sheets under the ticker symbols WCOEQ and MCWEQ are now worthless.  Top of page




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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.