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WorldCom to File for Chapter 11 Protection
Mantour writes: "To everyone's big suprise ;), Worldcom is going for Chapter 11. 'The Chapter 11 filing by WorldCom would follow once high-flying companies like energy trader Enron Corp. and Global Crossing Ltd., which crumbled into bankruptcy amid a crush of accounting investigations by federal regulators.' You can get more info in this Yahoo story" Update: 07/22 12:21 GMT by T : mnordstr points out a CNN report calling this "the largest bankruptcy ever."
It means if they do let you go they only have to pay out about two weeks of vacation tops as severence. There are also limits on expense reimbursment. On the other hand you paycheck is about as protected as it gets. Unless of corse they lay you off.
It also means they are (I think) less stringent requirments for the layoffs and such. It also means they are prohibited by law from paying off any pre-chap-11 debt, and nobody can deny then continued service on contracts so long as they pay the new bills. Which makes it a lot eaiser to stay in busniess.
In ANY company, employees are given the least consideration. They are viewed simply as a consumable resource, like fuel oil or coal (hopefully a bit more environmentally friendly). If Worldcom had a substantial fraction of its shares owned by employees (a horrible thought, on the face of it, to lose one's job and assets at the same time), they might have a say in the way things go, but as it is, you are merely a part of the machinery. If whoever buys the part you support does not already have people to perform that function, you may get to keep your job (albeit with different pay and benefits), but if a company in a similar business purchases the business unit you work for, unless their people already have more than they can handle, the plan will be for them to do the work you do now.
The other possibility would be if Worldcom was close enough to making a go of it that they did not need to sell off parts of the company, merely a reprieve from debt payments. Or if you work in whatever part remains, you may keep employed -- again, at different pay+benefits.
Hopefully, the retirement savings managed by the company were not used to prop up the collapsing stock price (so the pirates running the show could grab a bit more loot), as was the case at Enron.
The lesson to be learned here? Try not to work for crooks -- a pretty difficult proposition, nowadays.
Sort of. If they court lets WCOM go into chap 11 the debt is all susspended, along with any pre-chap 11 bills of any kind. To re-emerge from chap-11 they have to show that they are no longer losing money each month, and that they have a "repayment" plan worked out with their creditors. The repayment plan is normally some variant of "screw you, for ever $1 we owed you you get $0.03 and one share of stock...ha ha ha!".
In other words chap 11 basically lets you strip off all the debt (or a huge percentage of it). It also lets you out of any long term contracts (to buy or sell!) that you didn't like, makes it easier to fire people. Oh, and they can "un lease" a building by taking all their stuff out of it and saying "no, were are not paying" to the landlord.
So "too much debt" is no longer WCOMs problem. It is the problem of banks that loaned money, and supplyers that sent goods on purchase orders.
Now I have a theory that the little telco's going bankrupt forced prices down (the little telcos suddonly had "free" infrastructure!) which screwed the medim size ones...and so on. Not just the bankruptcy of corse, it was mostly the drop of the "dot coms", but still I think the bankruptcy laws do have a bit of a chain reaction type thing.
They are doing a debt for equity swap. In english, they are issuing more shares of stock in exchange for the retirement of some debt. This will result in less interest payments, ability to pay off the rest of the debt and have free cash flow to keep the company going. People should read the article. The reason for chapter 11 is for the debt to equity swap to take place, the company has to be legally under bankruptcy protection.
Anderson employees...
CNN.com - Playboy focuses on WorldCom, Andersen
Well, sort of, anyway. ANyone remember when Inacom tanked? I was working for them at the time.
Luckily, I got picked up by a "competitor" who was also onsite at the same place, so I only had a week of questionability.
THe schematic is slightly different.. Inacom claimed they *might* fold.. they claimed they *MIGHT* declare bankruptcy, and they put themselves on the block to be purchased, in whole or in part. Other groups came in, looked decided "I want part of this, but they are going to crash anyway, so I will just wait and absorb their assets after the crash, rather than paying an inflated (read: more than bottom penny) price for them.
However, what Inacom DID do, was broadcast a message on Wednesday, saying everything was cheery, bankruptcy could be avoided, etc. On Friday we got a voicemail saying "the vast majority of Inacom employees have been let go. Pinkertons (I think.. one of hte security companies) employees will escort you from the site."
We sued, in a class action, for lost wages, and violation of the WARN act.. (if a company knows its tanking, and doesnt tell you, they are liable.) This suit is still in progress, as far as I know. And may be for several years.. seeing ANY money, including 401K money can be tough as well. Once the IRS gets ahold of it, they can hold it pretty much as long as they want. Especially if there was financial malfeasance within the company.. you may also find out your company did not pay as much into the 401, health, insurance, unemployment, as they claimed they had. ANd there is nothing you can do, really, once the corporation folds/loses all its assets. The individuals who ran it are blameless, and it is very very difficult to sue them personally. (Hence, corporations of one.. for that very reason).
Good luck.. hope it all works out for you.. but it is often ugly in the long run.
Maeryk
Feminine Protection? What is that? A chartreuse flame thrower?
Employees are creditors in terms of salary owed, but being small creditors you have to get in line behind all the banks, vendors, etc. that have larger stakes.
In other words, you maybe keep your job, and if not you may get lucky and get paid before you're let go. But dont count on it.
None whatsoever. For now. Chapter 11 gives a company time to operate while it re-organizes, sells units, etc... without having to pay back creditors. It also means that pretty much everything that it does will have to pass muster with a bankruptcy judge, so it isn't a free ride. Eventually enough assets will be sold and the creditors paid off so that the company can emerge from Chapter 11, probably as a smaller, more focused organization. Or they may find that they cannot generate enough cash to pay off their creditors and then go into Chapter 7, at which point all the remaining assets will be liquidated.
A well-crafted lie appears unquestionable - Dama Mahaleo
WorldCom now has an official bankruptcy site. So far, there's nothing there but happy talk press releases.