| The American court did not allow WorldCom to be drowned The second-largest US telecommunications company, MCI, formerly WorldCom Inc., has reached a long-awaited agreement with the government to resolve its multibillion-dollar bankruptcy proceedings. New York Federal Judge Jed Rakoff approved the agreement between the firm and the US Securities and Exchange Commission (SEC). MCI will be forced to pay its shareholders and bondholders a fine of $750 million (500 million in cash and 250 in shares) - half the amount originally discussed.
“We have achieved significant results that can be considered an exemplary example of corporate governance, and the agreement reached is a consequence of these significant changes,” said current CEO Michael Capellas. However, according to creditors, the deal will not recoup all their investments and is a blatant injustice. The dissatisfaction of investors is quite understandable, because due to the financial fraud of the former management, they lost more than $200 billion. The district judge and SEC employees apparently have their own opinion on this matter. Most likely, the amount of $1.5 billion (the money that WorldCom was forced to pay if it had not received bankruptcy protection from creditors) and even more so $2.5 billion (the fine also proposed by the SEC) would be too onerous for a bankrupt. The effect of a new crisis at WorldCom would have a negative impact on the already weakened national economy. Well, according to officials, the money cannot be returned to investors.
“The proposed settlement is not only fair and reasonable, but also a good result (resolution of the conflict - Ed. ) that could reasonably be expected under similar circumstances,” Judge Rakoff said. The company's latest financial forecast for 2003-2005 indicates that WorldCom would not be able to pay off its creditors painlessly. Management decided to revise profit plans and recognize them as unattainable. So, if earlier the company hoped to make a profit of $78.3 billion for the current and two subsequent years, now this amount has decreased to 74.1 billion.
Some of MCI's competitors, such as AT&T and Verizon Communications, were also among those dissatisfied with the New York court's decision. They still believe that the settlement agreement and further reorganization will allow MCI to avoid or significantly reduce the size of its current debt of $41 billion. But the federal court, as before, ignored the competitors' claims and refused to liquidate the telecommunications giant. "Regardless of how WorldCom's debt restrictions are perceived, any suggestion that large and well-known companies such as Verizon and AT&T would not be able to compete effectively with WorldCom is without merit," the judge said.
Previously, MCI management entered into a preliminary agreement with the SEC, promising never to violate accounting rules in the future and to create a special department in the company responsible for proper training of employees. Since the bankruptcy, WorldCom has made several significant attempts to distance itself from its undesirable reputation, changing its name to MCI and updating its management team. But things are not going as smoothly as we would like. Until recently, in order to remain competitive, the company had to reduce prices for its services almost monthly. So far, WorldCom has neither confirmed nor denied allegations of financial impropriety and is still engaged in numerous legal proceedings with shareholders. Denis UVAROV |
|
