UPDATE: 25 banks to sue WorldCom
WorldCom Inc. will be taken to court Tuesday by 25 of its 27 banks in an attempt to recover a US$2.65 billion unsecured loan they provided in May, according to press reports.
The 25 lenders asked the New York Supreme Court on Friday for a temporary restraining order to stop WorldCom from using the cash, according to a report in the online edition of The Wall Street Journal. The judge, however, denied the request and scheduled a meeting Tuesday to discuss the issue. The lenders have also filed a lawsuit against WorldCom, the report said.
WorldCom spokeswoman Julie Moore said Monday that the company is declining to comment on the case.
The WSJ report said that the lenders were being led by Deutsche Bank AG, which it said had provided about $2.5 billion of the $2.65 billion loan. However, while Deutsche Bank spokesman Ted Meyer confirmed that the bank is involved in the 25 banks' effort to try to freeze WorldCom's cash, he denied that Deutsche Bank was leading the case and said the amount quoted as Deutsche Bank's part of the loan was "not remotely correct."
He could not confirm that a lawsuit had been filed, Meyer said. "We're really not commenting on anything," he said.
However, the other two lenders, J.P. Morgan Chase & Co. and Citigroup Inc., along with General Electric Co.'s financial services arm General Electric Capital Corp., would probably back WorldCom financially in a bankruptcy court proceeding, the report said.
WorldCom's attorneys said at the hearing that the company would be out of business if it could not use the loan, according to the report.
WorldCom bondholders have also objected to the banks' request, the report said, because that would effectively move the banks ahead of themselves in the queue to get any money refunded.