WorldComNews.com

Media Archive
July 15-21
Some Headlines and Commentary Provided By Ben Silverman and DotComScoop.com

Sunday July 21, 2002 @8:10 PM CDT

The Wall Street Journal and CBS MarketWatch report that WorldCom has filed for Chapter 11 Banruptcy tonight in the Southern District of New York . The court site should have the filing up later tonight or tomorrow.

Sunday July 21, 2002 @6:50 PM CDT

The Street.com reports that WorldCom Exec John Sidgmore has confirmed that the bankruptcy filing will take place tonight.

Sunday July 21, 2002 @ 5:30 PM CDT

Reuters reports that WorldCom will file the nation's largest bankruptcy ever tonight, plans to emerge in 9 to 12 months. "The bankruptcy would not include the company's international operations, Sidgmore said. WorldCom, which has 85,000 employees and operations in 65 countries, aims to emerge from Chapter 11 with a stronger balance sheet in about nine to 12 months."

Sunday July 21, 2002 @ 4:30 PM CDT

CBS MarketWatch and The Wall Street Journal report that WorldCom is filing bankruptcy today. Both also report that CEO John Sidgmore may be let go during the restructuring.

Saturday July 20, 2002 @ 12:40 PM CDT

Dow Jones, Reuters and others report the bankruptcy filing is looking like it will come tomorrow.

Reuters reports that bondholders failed to reach an agreement with WorldCom. "A bankruptcy filing by telephone and data services company WorldCom Inc., which is expected as early as Sunday, would not include a pre-negotiated debt-for-equity swap as some bondholders had hoped, sources familiar with the situation said on Saturday."

Bloomberg reports that WorldCom will offer flexible contracts to help keep customers. "WorldCom Inc., poised to file the biggest bankruptcy in U.S. history, said it's offering flexible contracts to keep business customers and monitoring its network to avoid telephone and Internet service disruptions. "

Friday July 19, 2002 @ 9:10 AM CDT

This is just scary. It appears that WorldCom has burned through about $2 billion in cash since May 16, according to analysis by The Clarion-Ledger. "WorldCom spends nearly $1.5 billion per quarter on day-to-day operating expenses. If firms demand up-front payments or pre-payments for services, that figure could double as the company faces its second and third quarter expenses at the same time," Robert Schoenberger reports. The paper also has a timeline of recent WorldCom events.

Place yer bets, place yer bets; when will WorldCom file for bankruptcy!? As early as this weekend, reports The Wall St. Journal. WorldCom currently has between $600 million and $700 million in cash, but roughly $250 million of that is controlled by its overseas operations, which aren’t expected to file for Chapter 11 protection, a person familiar with the matter said. The remainder is being burned up not only by the cost of operations but by WorldCom’s panicked vendors, who are now demanding up-front payments. "We have money to last four or five days," said one person familiar with the matter, "and that’s it."

CNN/Money meanwhile reports that the bankruptcy filing won't come until the company finalizes its debtor-in-possession financing deal. "As soon as they realize that they have to file for bankruptcy why wait?," the source said. "The sooner they get relief. It could come today, it could come tomorrow."

CNN article gives a good summary of the planned bankruptcy and states "At $103.9 billion, a WorldCom filing would be more than the total combined assets of all the public companies that filed for bankruptcy protection in the Southern District of New York last year, he said. Twenty-five companies, including Enron, went bankrupt in 2001, listing $102 billion in total assets. "

Bloomberg reports that it will be a banner year for class -action lawsuits thanks to Worldcom and others.

Bloomberg reports "WorldCom Inc., accused of fraud for its accounting practices, may file the biggest bankruptcy in U.S. history as early as Sunday to cope with creditors owed more than $35 billion, people close to the situation said"....

The majority opinion now seems to be that WorldCom will file bankruptcy on Monday. These articles from Reuters and CNN gives the details.

WorldCom employees were told on a conference call that WHEN the company files for bankruptcy, severance payments to those who have been laid off will be halted, this according to current and former WorldCom employees. While I've been told the company could file as early as tomorrow...

On24 cites analysts who say that Level3 may bid on WorldCom's UUNet dial-up business (audio). Considering Warren Buffet and friends recent investment, it's not bad speculation. But the company will need more than $500 million to get it. And to be honest, like IDT (where they at now, huh?), does anyone take Level3 that seriously? This is another company that has been close to the edge and its CEO is named as the one of executives who took IPO shares in that Salomon Bros. lawsuit (see below).

Screw the dotcom crash, the telecom crash is ten times bigger (doesn't that make all you dotcom kiddies feel better?). "The rise and fall of telecoms may indeed qualify as the largest bubble in history. Telecoms firms have run up total debts of around $1 trillion. And as if this were not enough, the industry has also disgraced itself by using fraudulent accounting tricks in an attempt to conceal the scale of the disaster," writes The Economist.

The Economist also explains what went wrong in the telecom sector and offers some solutions to fix it. "What will pick the telecoms industry up off the floor? Eventually, the problem of overcapacity will be overcome and supply and demand will be brought back into line. But only then will equipment sales start to pick up. The few analysts prepared to speculate about when this might happen talk vaguely about 2004."

Wait, not done with The Economist... The Power of WorldCom's Puff explains how inflated Internet traffic numbers drove WorldCom's demise. "At a conference in 1998, Mr Sidgmore's presentation included graphs that referred to 1,000% annual growth. In fact, he was referring to the growth of network capacity, not network traffic. But it was widely assumed that traffic was growing just as fast. WorldCom executives made similar claims in interviews published in 2000," writes the unnamed author. Doh!

Several sources reporting that WorldCom will file Chapter 11 Bankruptcy, maybe as soon as tomorrow. Ben Silverman at DotComScoop has heard the same thing.

Forbes article on how Salomon Smith Barney basically gave WorldCom's Bernnie Ebbers money through distribution of IPO shares.

Clarion-Ledger reports that only a few laid-off WorldCom workers attend meeting.

According to Bloomberg, WorldCom has arranged loans of up to $2 billion so the company can operate while under Chapter 11 bankruptcy protection. J.P. Morgan Chase & Co., Citigroup Inc. and General Electric Co.'s GE Capital are the firms who are supposedly willing to kick in.

Sucks to be David Myers. WorldCom has sued the former Controller for $800,000. Doesn't sound like much, considering, but it's the amount of money WorldCom paid Myers as a retention bonus two years ago. The lawsuit filed against Myers says the bonus was more than four times his annual salary. But the company seemed to think he was worth it. In a May 8, 2000, memorandum from former chief executive Bernie Ebbers to Myers, Ebbers attributes much of the company's success to "the highly talented executive team comprised of you and your peers," the Associated Press reports.

The House Energy and Commerce Committee has released the WorldCom documents (PDF) that reveal, among other things, a pattern of knowledge among finance people at the company that proves they knew the accounting "irregularities" were really scams.

The case pitting twenty-five banks against WorldCom has been moved to Federal court. The banks are trying to get back $2.65 billion in loans it extended the company earlier this year, before the accounting fraud was revealed. If the banks win, WorldCom would have to file bankruptcy immediately and seal a DIP (debtor-in-possession) financing deal. A 9:30 AM EDT hearing is set for tomorrow.

Mellon Financial took a $100 million hit because of WorldCom. "These results included a special provision for credit losses of 23 cents per share associated in large part with credit exposure related to customers that have been associated with recent allegations of accounting irregularities," the company said.

Update on those Intel job cuts mentioned late early this morning; the company will cut 4,000 jobs, about five percent of its workforce. As always with Intel, the company will look to cut the jobs through attrition and voluntary separation packages (buyouts).

I swear I've seen this headline used about thirty times; WorldCom Woes Deepen. A recap of yesterday's events, courtesy of CNN/Money.

The California Public Employees Retirement System (CalPERS) is leading a lawsuit against WorldCom claiming the company made misleading statements when it made a May 2001 bond offering. CalPERS is the nation's largest pension fund.

WorldCom still won't comment about whether or not the company missed an interest payment. Lawyers will square off today in New York Supreme Court as banks try to recover $2.65 billion in loans they ponied up to WorldCom this Spring.

Quick note while I regain conciousness and remember there are other companies... Intel reports Q2 earnings tomorrow and a scheduled address by CEO Craig Barrett has fueled layoffs rumors. Sources inform me that about 8,000 workers will be pink slipped, which conviently works out to about ten percent of the company's workforce. Not sure if the numbers of based on the ten percent, but that appears to be the rumor making the rounds inside the company. Let's hope it's not that many. Let's hope there are none at all (but that's doubtful). The Wall St. Journal first reported news of possible layoffs.

In an effort to conserve cash, WorldCom is paying out severance to laid off employees in installments. This has been of huge concernt to many employees that I've spoken to. Recently pink slipped employees are concerned that their severance will be affected if the company files for bankruptcy.

Looks like former Controller David Myers is in the investigative spotlight. Myers name has popped more and more as Congressional investigators look through documents supplied by WorldCom's attorneys. Btw, Myers' lawyer says he was on vacation and that's why he missed the July 8 House Financial Services Committee hearing. Let me get this straight; the guy resigns from a company because of the biggest scandal in the history of Corporate America and then goes on a vacation knowing full well that investigators from Congress, the DOJ, SEC and WorldCom want to talk to him? Sounds fishy.

Good rundown of the emails that House Energy and Commerce Chairman Billy Tauzin revealed on Monday.

If anyone from WorldCom is actually indicted, they won't be alone. Adelphia Communications Founder John Rigas and three of his kids are about to be slapped with indictments for fraud. The Rigas Family folk are accused of inflating subcriber numbers, revenue and cash flow for the past two years. The family basically used Adelphia, which they owned sixty percent of, to finance various ventures, including the Buffalo Sabres of the National Hockey League.

Former WorldCom Controller David Myers said he hoped it would not have to be explained, referring to the company's accounting irregularities, according to WorldCom auditor/whistleblower Cynthia Cooper. Cooper's notes of meetings with Myers and others were turned over to the House Energy and Commerce Committee. "This is the clearest and most definable violation of accounting standards we have seen. This was as pure a case of theft, of insider stealing," Committee Chairman Billy Tauzin said.

A double-whammy for WorldCom; the company missed scheduled interest payments of about $74 million on bonds today and the Federal Aviation Administration rejected WorldCom's bid on a contract worth up to $3.5 billion. Tomorrow is a big day as well; a judge could effectively freeze WorldCom's cash. If that happens, all hell could literally break loose as WorldCom would have to scramble to secure DIP (debtor-in-possession) financing.

WorldCom's accounting scams may date back to 1999, House Energy and Commerce Chairman Billy Tauzin told reporters today. "We're actually interviewing several witnesses at the moment who indicate to us that the problems may go back as far as 1999, not just the year 2000," Tauzin said, according to Reuters.

It would be the biggest bankruptcy in corporate history and WorldCom appears to be days away from filing for it. The speed of WorldCom's demise may surprise some investors. Only last week, WorldCom CEO John Sidgmore held out hope that bankruptcy could be avoided. In a brief interview Sunday, Sidgmore said he was still working on four scenarios for the company, two of which included declaring bankruptcy. He conceded time was running out because a cash pile of "less than $2 billion" was dwindling rapidly. Last week, Sidgmore said WorldCom's cash could last about two months. Sunday, he refused to reaffirm that time frame," USA Today reports.

Don't forget, WorldCom has a $79 million interest payment on debt due today. Cash has grown exceedingly tight as WorldCom struggles to stay afloat. Last week the company successfully fought an effort by its bankers to freeze its $2.65 billion credit line and canceled dividend payments due to MCI shareholders. But citing "invoicing issues," WorldCom has stiffed some European phone companies on service payments and runs the risk of losing some overseas connections," Scott Moritz of TheStreet.com writes.

WorldCom's UUNET unit is ripe for the picking. As a result of its global positioning, WorldCom is able to charge a premium for connectivity to its network - an enviable position for any Internet services company, particularly when its rivals are engaged in a price war," Patricia Fusco writes.

Citigroup, J.P. Morgan and GE Capital could kick in the financing needed by WorldCom if it files for bankruptcy, the Wall St. Journal reports. WorldCom's other major lenders tried to get their money back from the company last week, a move rejected by a judge, but one that would have basically shutdown the company. A debtor-in-posession financing deal would effectively dillute shareholder shareholder value and would give the lenders equity in the company.

On Sunday, Rep. Billy Tauzin, Chairman of the House Energy and Commerce Committee, announced that documents obtained from WorldCom reveal accounting scams began as early as 2000. A rundown of the coverage on this particular story (also blurbed below from Sunday, most outlets used wire service stories): Associated Press - Washington Post - Reuters - New York Post - New York Times.

Business Week says John Sidgmore's plan to rescue WorldCom is a long shot. Will creditors go for Sidgmore's plan? It will be tough getting all the parties to agree. But Sidgmore does have a small chance of pulling it off. Many bondholders agree with his argument that they will get more from taking equity in the new WorldCom than if they force a liquidation at today's distressed prices," the magazine writes.

Who gets to lay claim to the title of WorldCom whistleblower? It may be a British woman; Geraldine Kelly says she told the U.K.'s Department of Trade and Industry about accounting problems at WorldCom three years ago. U.S. investigators now want to talk Kelly.

FCC Chairman Michael Powell, apparently forgetting he's contributed to the problem, says the telecom industry is in a state of "utter crisis" and he may allow one of the Baby Bells to takeover WorldCom. The FCC broke up AT&T in 1984 citing monopolistic practices and in the years that have followed the telecom industry has become a muddled sector of big, failing players and backwater companies.

MS Rep. Ronnie Shows says that Congress is looking out for WorldCom investors. "For eight hours, Congressional investigators grilled company executives during an inquiry Friday. It was a bipartisan chewing out. In this case, you have as many Republicans as there are Democrats out of work," Shows told the Clarion-Ledger.