New York, Oct. 16 (Reuters): A US bankruptcy judge on Tuesday approved $ 350 million in additional financing for WorldCom Inc. to allow the company, which filed for the world’s largest bankruptcy in July, to continue operating while it reorganises.
Judge Arthur Gonzalez approved the second round of financing, bringing the total to $ 1.1 billion for the No. 2 US long-distance telecommunications provider.
The total amount of so-called debtor-in-possession financing — loans that allow a company to continue operating after filing for Chapter 11 bankruptcy protection — is $ 900 million less than the $ 2 billion WorldCom originally expected when it filed.
The court approved an initial $ 750 million financing in July. However, this month WorldCom’s bankruptcy attorney, Marcia Goldstein, said the company needed less financing than it originally expected because it now has $ 1 billion in cash — five times what it had in July.
A cash windfall usually occurs after a company files for bankruptcy protection because it does not have to pay bills it had owed prior to the filing, experts said.
John Dubel, a restructuring expert who was appointed chief financial officer after the company filed bankruptcy, declined to comment as to the source of the cash on hand.
WorldCom filed the world’s biggest bankruptcy case in July, burdened by $ 40 billion in debt and huge accounting misstatements.
The Clinton, Mississippi-based company fired chief financial officer Scott Sullivan as the $ 7.68 billion accounting scandal emerged. Four former WorldCom executives have pleaded guilty to participating in that manipulation and have agreed to cooperate with authorities probing the case.
The court also approved allowing the creditors committee, whose 15 members represent unsecured creditors, to hire FTI Consultant as its forensic accountants. FTI, who have been working for the committee since August, will analyse WorldCom’s past and present accounting practices.
Samuel Waksal, the former chief executive of ImClone Systems Inc., entered a partial guilty plea to insider trading charges on Tuesday and a prosecutor warned a broader case against Waksal and those he may have tipped could be brewing.