WorldCom pledges to emerge from Chapter 11

A day after announcing the biggest bankruptcy in history, the battered telecommunications company WorldCom is pledging that its services to customers would be unaffected, and hopes to emerge from Chapter 11 protection within six months.

John Sidgmore, the chief executive of the second-biggest US long-distance phone company, predicted yesterday that WorldCom would emerge from bankruptcy as early as January after cutting 75 per cent of its debts, currently more than $30bn (£19bn).

The reorganisation "is not going to be a liquidation", Mr Sidgmore said in New York, barely 12 hours after his company had formally filed for the largest bankruptcy of all time. The $107bn of assets listed by WorldCom eclipses the previous record of $63bn, listed by Enron when it sought bankruptcy protection last December.

Breaking apart WorldCom would not help solve the crisis, insisted Mr Sidgmore, who declared that though it would sell some assets to reduce debt these would not include its long-distance unit MCI, or its data network operation. Likely candidates for disposal include Worldcom's MFS Communications local telephone business, and parts of MCI's wholesale business.

For all the brave talk, however, analysts are sceptical Worldcom could emerge from bankruptcy as smoothly as its chief executive believes. "When you're in bankruptcy court, creditors will dictate how the company will be restructured," Ed Paik, a portfolio manager at the Liberty Utility Fund, said. Liberty owned 4.5 million WorldCom shares in March, which have slid from a peak of $64.50 in 1999 to about $0.15.

Creditors of the business include Royal Bank of Scotland and Lloyds TSB, which are each owed $100m.

Analysts believe that with the glut of telecommunications capacity, WorldCom will find it hard to sell enough assets. But Mr Sidgmore was optimistic. The value of the company, he said, "is is not in the switches, pipes we have underground and the hard assets", but in the company's 20 million customers and its brands. Thus far, he claimed, WorldCom hadn't lost any major customers.

The first bankruptcy hearing was scheduled for yesterday in New York, at which WorldCom will ask to be allowed to continue its business and to have access to a first $750m tranche of the $2bn of bank financing to help tide it through re-organisation.

"At the end of the day, this really will be business as usual," Mr Sidgmore said. He predicted there would be "no significant impact" on employees and that the company had enough cash to see it through re-organisation. The worry is that an internal audit which has still not been completed could reveal further problems, on top of the $3.8bn of accounting irregularities disclosed last month.

"It's unclear what other surprises will emerge," said Drake Johnstone, a telecoms analyst. The industry has been rocked by bankruptcy filings at Global Crossing and Adelphia and difficulties at Qwest, the fourth-largest US local phone operator, which is burdened by $26bn of debt and now facing a criminal investigation into some of its operations.