More Worldcom Bankruptcies DeclaredNov 8, 2002 | AP
1-800-Collect Inc., the calling service that has used Michael Jordan and Mr. T as pitchmen, joined parent WorldCom Inc. by filing for bankruptcy protection Friday.
Friday's filing which would put virtually all of WorldCom's domestic subsidiaries under bankruptcy protection may be a move to protect those units from creditors eyeing unprotected assets, telecommunications and bankruptcy experts said.
WorldCom's initial bankruptcy filing in July, the largest in U.S. history included its long-distance subsidiary, MCI Group, and a majority of its domestic subsidiaries.
"Part of what WorldCom needs to do in reorganizing is to not leave subsidiaries out there as low-hanging fruit for creditors," said James Owers, an expert on corporate restructuring and a finance professor at the Robinson College of Business at Georgia State University.
WorldCom Chief Financial Officer John Dubel said Friday's filing, which asks the court to add a total of 43 direct and indirect WorldCom subsidiaries into bankruptcy protection, was a formality. He noted that most, except for 1-800-Collect, are inactive.
But Friday's filing also noted that 11 unsecured creditors of those 43 subsidiaries have petitioned the court for repayment of $1.64 million they are owed.
"I think what you're seeing happening is there were additional creditors filing that wanted to be part of the act, and WorldCom decided to have it all under one umbrella" said Paul R. Brown, accounting professor at NYU Stern School of Business.
WorldCom has acknowledged more than $9 billion in accounting irregularities and is negotiating with the Securities and Exchange Commission to settle fraud charges related to its accounting. It had racked up $41 billion in debt when it filed for bankruptcy protection July 21.