Posted on 08/07/2003 2:16:49 AM PDT by sarcasm
Edited on 04/13/2004 2:10:36 AM PDT by Jim Robinson. [history]
AT&T, WorldCom's larger rival, made the claims in a filing with the US Bankruptcy Court overseeing WorldCom's Chapter 11 reorganization. WorldCom said it carried calls appropriately. The new allegations add to claims by AT&T last week that WorldCom improperly routed State Department and Postal Service traffic through Canada. The calls were put on AT&T's network allegedly to avoid local-line fees that were unwittingly paid by AT&T. WorldCom's rivals are seeking to derail the company's effort to emerge from the biggest bankruptcy this year.
(Excerpt) Read more at boston.com ...
The issue is the stockholders and the pensions. Those who loaned money to WorldCom, and didn't properly supervise how it was spent, according to the bankruptcy court decision, would get 100% of the company, with nothing going to those two groups.
There's something pretty bad when the money can be loaned, wasted, and then the fact that it's not paid back be used as a reason to take over the company.
Stockholders have also gotten something going to boycott MCI and through elected officials stop the government from giving contracts to MCI if the settlement isn't more equitable.
The bondholders have an awful lot more info than anyone else about company finances. Why should they get the company if they failed in oversight to see how their money was being spent?
In bankruptcy, secured creditors get priority claim to company assets over shareholders and unsecured creditors. It's always been that way. If it wasn't no business would ever get any kind of debt financing from any financial institution.
But, what about the oversight issue here? Shouldn't the creditors have some kind of responsibility to make sure their money isn't lining pockets? Aren't there often decisions where the original stockholders get some equity along with an arrangement to pay back some of the debt on a schedule?
Also, what about the PR? MCI has managed to make even more enemies with this. The rich guys who ran the company (into the ground) ran off with hundreds of millions of dollars. The rich guys who gave the company the money to waste now get the company because it isn't paid back. And everybody on top wonders why people are slow to go back to stock investing.
Any failure of secured creditors to exercise oversight does not negate their priority claim to the assets of the debtor corporation in bankruptcy. The responsibility for oversight lies with the shareholders and their representatives (i.e. the company's board of directors).
In Chapter 11, the shareholders of course retain their shareholders' equity, and the court will approve a debt repayment structure (typically also approved by a creditors' committee) that will enable the company to keep operating. But if the company fails and has to stop operations, it will go into Chapter 7. In that case the shareholders move to the very back of the line in terms of being able to recover any money from the assets of the corporation.
Also, what about the PR? MCI has managed to make even more enemies with this. The rich guys who ran the company (into the ground) ran off with hundreds of millions of dollars. The rich guys who gave the company the money to waste now get the company because it isn't paid back.
If company managers can be shown to have personally benefitted either through fraud or gross mismanagement, they are arguably liable to repay that money to the company for distribution to creditors and shareholders -- assuming the bankruptcy trustee pursues litigation against them to recover the money, and prevails against them in those claims.
And everybody on top wonders why people are slow to go back to stock investing.
Perhaps, but that has no bearing on the priority of payments to secured creditors.
AT&T inherited a basic infrastructure (paid for by you and me), they only paid to upgrade it when the market forced them to.
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