A federal judge approved the bankruptcy plan for WorldCom Inc. on Friday, clearing the way for it to change its name legally to MCI, settle with creditors and emerge from the bankruptcy it entered 16 months ago after an $11-billion accounting scandal.
The plan will erase $35-billion in debt and pay most creditors about 36 cents on the dollar. WorldCom's bankruptcy is the largest in U.S. history.
"This is a great day for MCI," said Michael Capellas, the company's chief executive. "Against all odds, we have reached our confirmation faster than anyone expected."
Assuming there is no appeal, MCI could emerge from bankruptcy within weeks, said David Dykhouse, a bankruptcy lawyer based in New York City. "But litigation against the company could go on for years," he said.
In a news conference Friday after the ruling by U.S. Bankruptcy Judge Arthur J. Gonzalez, Capellas said MCI expects to emerge from bankruptcy in January.
AT&T Corp., Verizon Communications Inc., SBC Communications Inc. and others have raised concerns that a new MCI mostly free of debt could further wound the already struggling telecom industry by offering lower rates to gain customers.
Analysts said that is unlikely because once Capellas takes MCI out of bankruptcy, he must still build value for some time.
"Clearly, Capellas was hired to clean up the mess, and he has done a reasonably good job," said Jim Andrew, vice president at Adventis, a Boston consultant. "MCI customer satisfaction ratings have actually been going up. He has focused the company more on customer service, which indicates he's trying to build longer-term value.
"There are still a lot of outstanding lawsuits against the company, and as long as they are hanging out there, it's not saleable," Andrew said. "Capellas has to build value for at least a year or two."
Another indication that MCI won't trigger a price war can be seen in price hikes it has imposed on long-distance customers, said Rich Sayers, founder of 1010phonerates.com, a Web site that tracks phone prices.
Sayers said MCI is raising rates as much as 75 percent for some of its heavily advertised dial-around services, known as 10-10 numbers.
Bernard Ebbers, WorldCom's founder and longtime chief, left the company early last year before revelations of the huge accounting scandal. Since then, the No. 2 long-distance phone carrier has recruited a new board and new management and has continued to do business under bankruptcy protection.
The firm, which is now based in Ashburn, Va., must restate its financial results before being able to trade new shares publicly as MCI.