MCI bankruptcy hearing postponed for settlement talks

The opening day of a hearing on MCI's plans for emerging from Chapter 11 bankruptcy ended early, as the company's representatives and those of two major organizations opposing its reorganization plan informed the court that they may be near a settlement.

U.S. Bankruptcy Court Judge Arthur Gonzalez gave the parties until midnight Monday to conclude their negotiations. When the court reconvenes Tuesday morning, the judge said he will expect either a status report on settlement plans or to proceed with the beginning of the hearing.

Gonzalez had earlier in the day rejected motions for a longer postponement of the hearing and for a summary judgment rejecting MCI's reorganization plan. Since a one-day delay in opening the hearing would not unduly slow proceedings and could lead to a settlement that would significantly alter the issues before the court, a delay of several hours was acceptable, Gonzalez said. MCI's representatives said they believe a settlement is possible with two of the most vocal objectors to its reorganization plan, groups representing the holders of bonds and trade claims on WorldCom's former MCI subsidiary.

Expected to last several weeks, the New York hearing will determine if MCI, still legally operating as WorldCom, can emerge from the nation's biggest bankruptcy, in the wake of an $11 billion accounting scandal that led to a myriad of state and federal charges and sanctions against the company and its former top executives. A number of creditors have lodged objections to MCI's reorganization plan, although MCI has made progress toward settling with all but 15 or 16 of the objecting parties, MCI attorney Joseph Allerhand said during Monday's opening proceedings.

The IDG News Service is a Network World affiliate.