Worldcom seeks protection in biggest corporate bankruptcy in history

Telecommunications giant WorldCom Inc. filed for bankruptcy protection, about a month after disclosing it had inflated profits by nearly $4 billion through deceptive accounting.

The bankruptcy is the largest in corporate history history and the latest in a spectacular series of collapses.

WorldCom chief executive John Sidgmore told The Associated Press that his company had negotiated approximately $2bn in financing while it reorganizes. The company hopes to emerge from bankruptcy in 12 months.

Mr Sidgmore said the bankruptcy should have no effect on the company's customers — from long-distance users to corporate data users.

"At the end of the day, this really will be business as usual," he said. "We don't think that there will be any significant impact on the employees and vendors, for that matter, and we should have plenty of cash to make it."

Drake Johnstone, a telecom analyst with Davenport & Co. in Richmond, Virginia, said the banks providing the new money hope WorldCom will be able to emerge from Chapter 11 as a viable enterprise.

"My concern with that scenario is it's unclear what other surprises WorldCom has in store," he said. "The (internal) audit is not complete. At this point we don't know how much revenue or cash flow the company has."

Mr Sidgmore said the company would look into selling some of its peripheral businesses, but not key franchises like MCI or UUNET. MCI is the company's core long-distance business; UUNET is a major Internet player.

Despite the bankruptcy, no immediate disruptions are expected for Worldcom's millions of MCI long-distance customers or at UUNET, which accounts for 29 per cent of the capacity on the nation's busiest Web routes.

Mr Sidgmore said the bankruptcy won't include the company's international operations.

The collapse of WorldCom follows costly scandals at other big-name companies, including Adelphia Communications, Global Crossing and Enron, all of which have filed for bankruptcy as they attempt to pay creditors and reorganize their businesses.

The bankruptcy would be twice as large as Enron's record-setting filing in December and four times as big as Global Crossing's in January. In its filing, WorldCom reported more than $107bn in assets but said its liabilities total more than $65bn.