Telecommunications company WorldCom Inc. filed for protection Sunday night under the U.S. Bankruptcy Code's Chapter 11 provisions, the online edition of the Wall Street Journal reported.
WorldCom's is the largest bankruptcy filing in U.S. corporate history, according to the Journal, with the company listing assets of over US$100 billion, and having more than 1,000 creditors. The company has debt estimated at $32.8 billion, several thousand corporate customers and serves around 20 million consumers.
In an attachment to its filing with the U.S. Bankruptcy Court for the Southern District of New York, WorldCom wrote that it believed it was in the best interest of the company, its creditors, employees, and other interested parties for it to file the petition seeking relief under the provisions of Chapter 11, according to the Journal.
A Chapter 11 bankruptcy filing gives a financially beleaguered company court protection from creditors as it tries to work out a plan to pay back those creditors. The filing means that WorldCom will not have to pay interest due on loans taken out earlier.
It will also give the company access to $2 billion worth of loans from its banks under a system known as senior secured debtor-in-possession financing, the Journal said.
WorldCom will use the court's protection to restructure its debt, sell off inessential assets and focus on key businesses so it can emerge from bankruptcy protection as a viable company, the Journal reported.
The bankruptcy filing was widely expected in the wake of accounting scandals that have hit the company, and the precipitous fall in telecommunications company valuations.
WorldCom was valued at around $120 billion at its peak in the summer of 1999. Late last week, WorldCom's market capitalization had fallen to $280 million, the Journal reported.