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WorldCom to get new name, CFO

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PHILADELPHIA: WorldCom Inc. plans to emerge from bankruptcy with $4.5 billion to $5.5 billion in total debt, a new image and a new name. The telecommunications company plans to change its name to MCI - the brand of its residential long-distance service - as part of a reorganization plan to be unveiled on Monday, sources familiar with the situation said on Sunday.



The sources said the company also plans to name a new chief financial officer and change its headquarters to Ashburn, Virginia, from its current home in Clinton, Mississippi.



The MCI brand, which had been drilled into consumers" minds by commercials featuring the likes of Michael Jordan, will be used in advertising as the name of the whole company, an apparent effort by WorldCom to distance itself from its previous difficulties. The official corporate name, however, will not change to MCI until the company emerges from Chapter 11 bankruptcy later this year, sources said.



WorldCom, which last year filed the world"s largest bankruptcy case after an accounting scandal that may top $11 billion, declined to comment. A representative for the creditors" committee did not return calls seeking comment.



Creditors will split the value of WorldCom assets, which they estimated at about $12 billion. That value will be split between debt and equity in the reorganized company, sources said. Under the reorganization plan, which must be approved by the bankruptcy court, WorldCom would have about $3.5 billion to $4.5 billion in net debt, sources said.



It also would have at least $1 billion in cash on its balance sheet to give it a safety net for operations, capital spending or other expenses, sources said. That would put its total debt at about $4.5 billion to $5.5 billion, sources said.



WorldCom"s many classes of bondholders may get simplified into two or three groups, with each getting a different amount of money in exchange for their holdings, a source previously told Reuters. Investors in WorldCom notes hold roughly $27 billion of the bond debt, while MCI bondholders own about $3.3 billion and Intermedia bondholders own about $1.7 billion.



Filing the reorganization plan before a court-imposed deadline is part of a 100-day plan sketched out in January by WorldCom"s new chairman, Michael Capellas. The company also has cut jobs, strengthened its focus on small and mid-sized businesses, changed its residential calling plans, and set plans to expand into more local telephone markets.



WorldCom also has changed its management team and board of directors and overhauled its accounting and corporate governance practices to put its problems in the past. The move to dump its tarnished brand name and adopt the name of its MCI residential long-distance unit will further help the company reshape its public image, analysts said.



The name change, which was reported by Reuters in January, would allow the company to take advantage of its strong MCI brand, which was known for innovation, competition and growth, analysts said. WorldCom aimed for a quick reorganization to preserve as much value as possible. A faster exit from bankruptcy would help the company preserve more of its customer base and retain key employees, analysts said.



WorldCom"s sales have been trending downward since its Chapter 11 bankruptcy filing in July, when it had $2.46 billion in monthly sales. Each month, sales have been little changed or lower than the previous month, putting WorldCom on track for an annualized revenue drop of about 26 percent, analysts said.



Rivals such as AT&T Corp. and Sprint Corp. have claimed they are winning contracts and market share as corporate customers pare their business with WorldCom. The two carriers have said they have pulled a combined $2.1 billion in business away from WorldCom since its financial woes emerged last summer.



© Reuters

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