NEW YORK (CNN/Money) -
WorldCom hopes to emerge from Chapter 11 by next summer, CEO John Sidgmore said Monday, a day after one of the shining lights of the 1990s telecommunications and Internet boom filed the biggest bankruptcy in U.S. history.
"My hope is we can go through Chapter 11 as quickly as possible," Sidgmore told reporters at a morning news conference in midtown Manhattan, adding he hoped the company could reorganize and emerge from bankruptcy in nine to 12 months.
The troubled telecommunications company, which last month revealed $3.8 billion in accounting errors, had little choice but to file for bankruptcy protection after burning through much of its $2 billion in cash in recent weeks, he said. In addition, some vendors demanded accelerated payments.
"We fought hard to avoid [bankruptcy]," Sidgmore said. "But it was the only way to provide for the company."
WorldCom plans to re-emerge mostly intact but does plan to sell some assets, the CEO said. The company plans to keep UUNet, the subsidiary that sells Internet services to large corporations and other customers, as well as its consumer and long-distance units.
"Our reorganization will not be a liquidation," Sidgmore said.
CNNfn's Fred Katayama reports on the largest bankruptcy in U.S. history.
Separately, the Justice Department asked the federal judge overseeing the bankruptcy to appoint an independent examiner to monitor for mismanagement, irregularities and possible fraud at the company.
The department, through U.S. Trustee Carolyn Schwartz, asked that the examiner prepare a report on the investigation within 90 days of being appointed, a motion filed in the U.S. Bankruptcy Court for the Southern District of New York said.
"The debtors do not object to the motion or the form of the proposed order," the Justice Department said in its motion. Judge Arthur Gonzalez, who is overseeing the bankruptcy, approved the appointment of an examiner in a late Monday hearing but did not appoint anyone.
WorldCom, built by a huge series of acquisitions in the 1990s, saw its fortunes start to decline in late 1999 when businesses slashed spending on telecom services and equipment. Its former CEO was forced out in April, and it announced the accounting errors on June 25.
At the time, it said it was laying off 17,000 employees, and Sidgmore said Monday no further job cuts were planned. As of June 30, WorldCom had 57,700 full-time workers and about 6,200 part-time personnel, court documents said. Judge Gonzalez granted a motion by WorldCom to pay 5,100 recently terminated employees up to $4,650 in severance.
WorldCom has not lost any substantial customers, but it will probably not release a second-quarter earnings statement this week, Sidgmore said.
Bigger bankruptcy than Enron
Clinton, Miss.-based WorldCom filed the biggest bankruptcy on record late Sunday, dwarfing that of Enron Corp. WorldCom's $107 billion in assets at the time of its filing were nearly twice those of Enron, the Houston-based energy marketer that filed for Chapter 11 bankruptcy protection in December.
Under Chapter 11, a company is protected from creditors as it seeks to reorganize and work out a plan to pay its debts.
In its filing, WorldCom listed more than $40 billion in liabilities, most of that debts to bondholders that will now be overseen by a federal judge overseeing the company's reorganization. In a hearing late Monday, Judge Gonzalez allowed the troubled telecom to secure a $2 billion loan, or "debtor-in-possession" financing, which would allow it to operate as it reorganizes.
WorldCom, in court papers filed Monday, said it is desperately in need of the cash to continue operating. "Currently, WorldCom does not have sufficient funds with which to operate its businesses," the company said.
Of the $2 billion financing, WorldCom will be able to access $750 million immediately. The company confirmed bankruptcy court approval of that much of the financing early Tuesday. The hearing on the remaining financing is set for Sept. 4.
"Now, in a strange way, we will be stabilized," Sidgmore said Monday of the company's bankruptcy filing. "We can be more certain about where we are headed."
The company has suspended bonuses to its executives, and future compensation will be decided by Judge Gonzalez, who is also overseeing Enron's bankruptcy, Sidgmore said.
But the court authorized payment of other wages, salaries, medical, disability, vacation and benefits due before the bankruptcy filing. It also granted a further stay of the scheduled conversion of the MCI group tracking stock into WorldCom common stock.
Sidgmore to stay as CEO?
Recent news reports have speculated about the future of Sidgmore, who admitted Monday he had not been involved in company operations for several years. "Creditors and others will have to decide if they have confidence [in me]," said Sidgmore, who took over in April after former WorldCom CEO Bernard Ebbers was forced to resign. Sidgmore had been a WorldCom director.
WorldCom is conducting interviews for the position of chief restructuring officer, and Sidgmore hopes to have candidates in about two weeks. The telecom's own internal investigation of its accounting scandal is continuing.
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The company will not know if it will have to increase its $3.8 billion restatement of expenses until its new auditor, KPMG, completes its review, Sidgmore said. "That is not expected until the end of the year," he said.
Meanwhile, President Bush told reporters Monday morning that he is "very concerned" about the impact of WorldCom's bankruptcy on workers, investors and the economy. He also urged Congress to crack down on corporate abuses, a White House spokesman told the Reuters news service Monday.
Analyst Adam Quinton, who covered the company for Merrill Lynch, dropped that coverage Monday.
"The scale of this failure is staggering," Quinton told clients.
Relieved of its obligation to pay $2 billion in annualized interest, WorldCom, Quinton said, should continue to "function fairly well since, unlike most other telecom failures, it has a strong recurring revenue base."
Shares of WorldCom (WCOME: up $0.05 to $0.14, Research, Estimates), which faces Nasdaq delisting, edged higher Monday.