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MCI Officially Exits Bankruptcy

Apr 20, 2004 | Washington Post

MCI Inc. officially emerged from bankruptcy this morning, 21 months after filing the largest Chapter 11 case in history.

The Ashburn-based telecommunications giant was able to retain almost all of its core assets and is still the nation's second largest long-distance company for residential customers. It is also a leading provider of high-speed Internet service to business customers.

As of today, the company, formerly known as WorldCom Inc., has officially changed its name to MCI Inc. The name change is part of its effort to distance itself from the $11 billion accounting scandal that led to its collapse in 2002.

Last year, MCI reached a $750 million settlement with the Securities and Exchange Commission that resolved charges of securities fraud. The company also survived an effort by some members of Congress to disqualify it from lucrative federal contracts.

MCI had originally planned to emerge from bankruptcy last fall, but that plan was delayed in part by the mammoth task of issuing corrected financial statements for several years dating back to 1999, a gargantuan task that cost $800 million and involved approximately 1,000 auditors, accountants and consultants.

"We took on every obstacle, kicked them down one at a time and went on to the next one," said MCI Chief Executive Michael D. Capellas during a conference call this morning. "It was sort of a marathon with hurdles."

The company is now effectively owned by a handful of bondholders who acquired the company's debt during the bankruptcy process. Those bondholders will be issued about 326 million shares of stock in the new MCI company. The company expects regular trading of its shares to begin sometime in the next several weeks.

Former WorldCom shareholders were effectively wiped out by the bankruptcy process. However, under the SEC's settlement with the company, the $750 million penalty paid by MCI will be used to partially offset the loss of individual shareholders who can prove they were harmed by the accounting fraud.

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