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July 17, 2002 — (WEB HOST INDUSTRY REVIEW) — Under investigation for nearly $4 billion in improperly accounted for expenses, telecommunications firm WorldCom arranged for $2 billion in funding on Tuesday that the company could use to keep operating if forced into bankruptcy by its lenders, according to a report by Reuters.
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The debtor-in-possession funding, backed by the value of WorldCom?s Internet network and other assets, would be supplied by Citigroup Inc., J.P. Morgan Chase & Co. and General Electric Co.?s GE Capital financing unit.
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WorldCom finalized the funding pact following a scandal created last month when the company disclosed that it had improperly accounted for expenses in the previous five quarters. The company is under investigation by the government and the Securities and Exchange Commission, and is probing its own books as far back as 1999.
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The company missed payment of $79 million in interests this week, and a lawsuit filed by 25 of WorldCom?s lenders, alleging that the company committed fraud by fabricating its financial position when it secured a $2.65 billion loan, was moved to federal court.
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The DIP funding was reportedly arranged by WorldCom in case it loses the lawsuit filed by its lenders and is forced to quickly file for bankruptcy. The funding would allow the company to continue operating its networks and paying its customers in the case of a drawn-out bankruptcy process.
