WorldCom is expected to declare bankruptcy this weekend as the ailing telecommunications carrier struggles against the weight of a $32 billion debt.
WorldCom said it was facing a cash shortage, meaning that the telecoms company is likely to file for Chapter 11 bankruptcy to allow service to continue for its 20 million consumers and thousands of corporations. WorldCom handles up to half of the United States' Internet traffic. Under Chapter 11 of the federal bankruptcy code, a company continues to operate while it works out a plan to pay its debts.
A person close to the company said a filing under Chapter 11 of the US bankruptcy code could come on Sunday or Monday. Its international subsidiaries are not expected to file for bankruptcy.
The company, facing criminal and regulatory investigations after it revealed a $3.9 billion accounting fraud, has been trying to arrange new funding to maintain operations as it tries to restructure under bankruptcy protection.
JP Morgan, Citigroup and GE Capital are leading talks on the debtor-in-possession financing, the FT said.
WorldCom missed an interest payment on its bonds last week, and is in court battling its bank lenders over $2.65 billion in credit facilities. Bank lenders claim WorldCom committed fraud when it drew on its loan in June as it was misstating its financial health at the time.