Help us make it through the night – Worldcom CEO
The Mutual Self Preservation Society
WorldCom Inc believes its pivotal role in the US's communications infrastructure and its bankers' self interest will help it to stave off the threat of bankruptcy.
At least that was the impression created by CEO John Sidgmore yesterday at the company's first full scale press conference since the company last week revealed accounting irregularities to the tune of $3.8bn.
Sidgmore also dropped more hints as to which businesses the Clinton, Mississippi-based company will consider offloading, and sought to reassure investors that as long as it secures further credit lines and no more unexpected earthquakes hit the telecoms market, it should be able to restructure in a relatively orderly manner.
Sidgmore admitted he could not say "we're not going to wind up in bankruptcy at some point." Even before last week's disclosures, the company was negotiating new credit lines with its banks. However, he said yesterday the company was talking to its bankers, and he was confident that it would have two proposals by the end of this week, even if these are "not necessarily the right proposals".
Assuming the company did work out a deal with the banks, said Sidgmore, combined with its $2bn cash on hand, the company could "make it through". The only caveat, apart from catastrophic unseen events, said Sidgmore, was if customers changed their paying behavior, and vendors and suppliers started demanding the company pay them upfront.
Sidgmore said it was unlikely that the banks would not throw the company a lifeline. He said it was common knowledge that banks would come off worse if they allowed the firm to slide into bankruptcy, than if they helped it survive. He said the first payment that could be "problematic" was a $2bn payment on its bonds due early next year.
As well as appealing to bankers' self interest in keeping the company afloat, Sidgmore also suggested it was in the US national interest not to let WorldCom collapse. He said the company handled half of the internet's traffic, and 70% of US email. The company has significant contracts with the US government, including the military.
He said that he had spoken to the chairman of the FCC, Michael Powell, who had voiced his support for keeping WorldCom's services up and running. At the same time, he admitted, Powell had not made any commitments that would help WorldCom out of its current predicament. All the same, said Sidgmore, there was "very little chance" of a blip in service.
While customers were understandably uneasy, said Sidgmore, the company was working hard to make them feel more comfortable about its future. While senior management were talking to nervous major customers, no one had bailed out on WorldCom yet.
The company has already committed itself to getting out of the wireless business, and is in the process of shedding around 17,000 workers. Sidgmore said further sales were obviously an option. He hinted the company could scale back its operations in Japan, saying that while it needed a global presence there, it was
"not 100% clear we have to be an intra-Japanese carrier." He said it had a lot of real estate to offload.
Newark, New Jersey-based carrier IDT Corp has already said it is preparing a bid for WorldCom's MFS Network and Brooks Fiber Inc, and for its consumer and small business long-distance telephone business. The company valued its offer at $5bn.
If the market deteriorated and dented its efforts to become cash flow positive, Sidgmore said "more adjustments" may be necessary.
Sidgmore once again voiced his and the firm's shock and outrage over the accounting irregularities that landed the company in its current mess. He strove to make it clear that it was a previous management regime that had presided over the irregularities, and added that it was the company's internal staff, not outside auditors, who had first spotted the problems.
Former CFO Scott Sullivan has already been terminated from the firm. Asked if former CEO Bernie Ebbers had known of the irregularities, Sidgmore said: "We really have no idea."
Meanwhile, the company has requested a hearing before the Nasdaq Listing Qualifications Panel, to respond to the exchange's move to delist the company.