WorldCom lenders fail to recover $2.65bn

WorldCom Inc bank lenders have failed in their efforts to recover the $2.65bn (€2.67bn) they were owed by the company after a New York judge rejected their request to impose a temporary restraining order against WorldCom, the Financial Times reported in its online edition, citing sources.

People familiar with the situation said the bank lenders, which include Deutsche Bank and Citigroup, requested the order from the New York State Supreme Court this morning in a last-ditch attempt to recover at least some of the $2.65bn (€2.67bn) unsecured loan they have extended to the company.

The FT said the banks told the court that the credit facility, which WorldCom drew down in May, had been given to the company based on misleading financial information. WorldCom last month said it revealed it had hidden $3.9bn (€3.93bn) of expenses since the beginning of 2001.

The banks' aggressive move, which bankruptcy experts describe as highly unusual, suggested that talks between the two sides about a further injection of funds into WorldCom have completely broken down, the report said.

It also further increases the likelihood that the company will file for Chapter 11 bankruptcy in the near future, which WorldCom CEO John Sidgmore said earlier is an option being considered by the company.

WorldCom has retained Lazard, which has a large restructuring department, to prepare it for a bankruptcy filing, according to the FT.

The banking group, which comprises more than 20 lenders, had offered to inject more cash into WorldCom if the company pledged its assets as security for the existing $2.65bn (€2.67bn) facility.

However, Citigroup is understood to have resigned from the informal steering committee which was determining the banks' strategy with respect to WorldCom, the sources said.

WorldCom could not be reached for comment on Friday night, the FT said. Lazard, Citigroup and Deutsche Bank declined to comment.