By Robert Anderson
Despite filing for the largest bankruptcy in U.S. history, Worldcom senior management remains confident the company will survive and eventually flourish.
Rebecca Saltman, a spokeswoman for Worldcom, said that by filing for Chapter 11, Worldcom is allowing for the preservation of jobs and maintaining the viability of the company.
At a news conference July 22, John Sidgmore, Worldcom president and CEO, said the company will move through the bankruptcy process “as quickly as possible and emerge as a stronger and much healthier enterprise.”
According to a Worldcom news release July 21, “The filings will enable the company to continue to conduct business as usual while it develops a reorganization plan.”
Worldcom cut 17,000 jobs in June, amounting to almost 20 percent of their workforce. The cuts included 10 of 85 Utah employees, but additional cuts are not in the companies restructuring plan.
“We have no plans to lay off additional people at this time,” Saltman said.
Sidgmore said he believes Worldcom has a promising future and points to the ability of the company to maintain their largest customers despite future uncertainty.
“I suspect that our plan will include keeping the core of Worldcom intact,” Sidgmore said.
According to the Personal Bankruptcy Center Web site, Chapter 11 bankruptcy “is the type of bankruptcy that corporations and large businesses file when they want to continue operating their business while getting debt relief.”
The Web site also stated that filing for Chapter 11 is a complicated reorganization of business assets and liabilities and usually involves teams of attorneys and accountants.
Steve Watchman, a bankruptcy lawyer for Ray, Quinney and Nebeker in Salt Lake City, said the pecking order for who gets paid first in this type of bankruptcy filing usually results in shareholders losing out.
“Shareholders could be diluted or completely eliminated,” Watchman said.
When a Chapter 11 bankruptcy is filed, the first allocation of assets are put toward administrative costs of the bankruptcy, such as attorney and accounting fees as well as taxes, he said.
The next set of payments goes to secured and unsecured company liabilities. Usually, this leaves some liabilities unpaid and nothing left for stockholders, Watchman said.
When asked about the recent investigation into admitted accounting irregularities in the company”s financial statements, Sidgmore replied that the company had “turned over every conceivable and questionable item we”ve found.”