MCI and the two principal objectors to its reorganization plan have reached a settlement agreement, removing an obstacle that could have complicated MCI's quest for ratification of its plan for emerging from Chapter 11 bankruptcy.MCI attorneys announced the settlement and its terms Tuesday morning, as the company's bankruptcy hearing resumed in New York. Overseen by MCI CEO Michael Capellas, negotiations stretched on until nearly 4 a.m. Tuesday morning, several hours past a midnight deadline set Monday by U.S. Bankruptcy Court Judge Arthur Gonzalez.The settlement proposes payment of 44.5 cents on the dollar to holders of securities in MCI called QUIPS (quarterly income preferred securities), for total consideration in cash and notes of $334 million. Under MCI's initial reorganization plan, QUIPS holders would have received nothing.Tuesday's settlement agreement also increases the compensation to be awarded to holders of MCI trade claims, who will now receive 52.7 cents for each dollar owed.The settlement agreement must still be approved by various groups involved in the bankruptcy, but representatives from MCI and the organizations representing the QUIPS holders and trade claims owners said they do not expect complications in obtaining those approvals."This is obviously a huge move on the part of the company. It is my understanding that there were fairly large inter-creditor issues due in part to complex inter-company debt," said Claude\u00a0Montgomery, partner in the global bankruptcy group of law firm Salans in New York.MCI's bankruptcy hearing adjourned early for the second day in a row. It will resume Thursday, when copies will be distributed of the settlement agreement and MCI's amended reorganization plan. The company still faces objections to the plan from several other creditors, but MCI attorney Joseph Allerhand said he hopes those can be quickly resolved."The process and path to confirmation has been significantly streamlined," he said.According to Montgomery, it is unlikely that smaller creditors would to seek to derail the hearing."Its a tough burden for a small creditor to take, especially in a complex financial situation like this one," he said.MCI, still legally WorldCom Inc., is trying to emerge from the bankruptcy that followed its disclosure of widespread accounting fraud totaling $11 billion. While the company hopes to move out of bankruptcy within the next few months, several of its former executives remain enmeshed in criminal prosecutions for their roles in the company's collapse.Laura Rohde, in London, contributed to this report.