- The Washington Times - Monday, September 8, 2003

NEW YORK (AP) — MCI was close to settling yesterday with two groups of creditors that opposed a deal to repay just a fraction of the company’s $41 billion debt, prompting a surprise adjournment as hearings began on a plan to emerge from bankruptcy.

A settlement could remove the last major obstacle that the company formerly known as WorldCom faces in persuading a bankruptcy court to approve the long-distance carrier’s financial reorganization after a ruinous accounting scandal.

U.S. Bankruptcy Judge Arthur Gonzalez said the talks between Ashburn, Va.-based MCI and two groups holding close to $1 billion in combined claims against the company appeared to be showing enough progress to allow the parties another day to negotiate.

One of the groups, owners of about $750 million worth of a lower class of debt, would be snubbed entirely by the reorganization plan currently on the table, while the other group has been offered payment of 36 cents on the dollar.

None of the parties would say how much either group would be paid if a settlement is reached.

“I don’t think we would have asked the court to adjourn the hearing if we didn’t think an adjournment would bear fruit,” said Edward Weisfelner, the attorney for a group of hedge funds that purchased $230 million worth of claims and wants more than the 36 cents per dollar that MCI has offered to pay.

The hearing is scheduled to resume today.

Despite recent angry exchanges over charges that MCI has disguised its long-distance calls to avoid fees that local phone companies are paid to connect such calls, the company’s accusers say they won’t attempt to block the reorganization with those grievances.

The charges by rivals including AT&T; Corp., SBC Communications Inc. and Verizon Communications Inc. are being investigated by federal prosecutors. MCI has been suspended from competing for government contracts pending the outcome of the probe, and the most verbal accuser of recent weeks, AT&T;, filed a private fraud suit last week.

In contrast, the so-called confirmation hearings before Judge Gonzalez will likely focus on matters relating to the accounting scandal exposed last summer, in which the company fabricated $11 billion worth of profits. Federal prosecutors have charged five executives; Oklahoma prosecutors have also charged former Chief Executive Bernard Ebbers.

The hearings are expected to deal with “what I would describe as traditional objections relating to people who think they should be getting more money than they’re getting … the same thing that happens in every bankruptcy case,” said Alfredo Perez, MCI’s lead attorney. “We have to prove that the plan is feasible. We have to prove creditors would receive more” under the reorganization plan than if the company were liquidated.

Mr. Perez said MCI planned to call about 12 witnesses in support of the reorganization plan, which would eliminate all but about $5 billion of the debts that WorldCom owed when it filed for Chapter 11 protection last summer.

LOAD COMMENTS ()

 

Click to Read More

Click to Hide