Return to Transcripts main page

CNN Live Today

WorldCom: Service Should Remain Normal

Aired July 22, 2002 - 12:02   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KYRA PHILLIPS, CNN ANCHOR: We begin with a colossal bankruptcy and a continued sell-off on Wall Street.

To no one's surprise, the telecommunications giant, WorldCom, last night became the largest company in U.S. history to file for Chapter 11. That will enable it to hold its creditors at bay, while it refigures its debts and operations. And while the filing was initially greeted by a yawn by investors, old habits returned by mid- morning, and the markets all took a dive.

We have extensive coverage beginning with CNN's Allan Chernoff, who is wired on WorldCom in New York.

Hi -- Allan.

ALLAN CHERNOFF, CNN FINANCIAL NEWS: Good morning, Kyra, well, I should say good afternoon to you.

Kyra, of course, as we reported, WorldCom had been working on this filing all last week, arranging financing of up to $2 billion, simply because the company was quickly running out of cash. Three weeks ago, WorldCom actually had $2 billion in cash; today, only a few hundred million dollars. Pressure was rising on the company, vendors were demanding early payment. Essentially, the CEO had no choice.

(BEGIN VIDEO CLIP)

JOHN SIDGMORE, WORLDCOM PRESIDENT: I regret that we are in the position we are in today. We fought hard and frantically to avoid this. But ultimately, the board of directors decided that taking this action was the very best way to help the greatest number of people, including our customers, our investors and our employees.

(END VIDEO CLIP)

CHERNOFF: Now, WorldCom is saying that service should remain normal. That, after all, is part of the point of a bankruptcy protection filing, to allow the company to continue to operate, and so that it doesn't have creditors demanding payment of bills. And WorldCom says there have been no major defections among its corporate customers. Of course, a few individual customers obviously have been switching out of MCI, but the service does remain regular today.

Now, the company is also saying that it hopes to emerge from bankruptcy protection as early as nine months from today, but they do concede it could take much longer.

One other note, I asked John Sidgmore whether he knows the extent of the full accounting scandal at the firm. Keep in mind, it was that $3.9 billion cooking of the books that triggered this bankruptcy. Sidgmore said he has no idea and will not know until the company's new auditor, KPMG, finishes its review of the books, and that won't happen until the end of the year -- Kyra.

PHILLIPS: Allan, how is this affecting the stock market right now?

CHERNOFF: Well, Kyra, it certainly is affecting the telecommunications industry, simply because a lot of those Baby Bells, the local operating phone companies, they are owed as much as $700 million by WorldCom. And once WorldCom is in bankruptcy court, the hearing starts at 2:00 Eastern Time this afternoon, they may not be getting paid so quickly. So investors are pretty worried about that. Also a downgrade from Merrill Lynch of those stocks.

So it's having that impact within that sector. But in terms of the overall sell-off for the market, certainly we can't attribute it to WorldCom, because, as we said, this bankruptcy filing was highly anticipated -- Kyra.

PHILLIPS: Allan Chernoff, thank you.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com.