WorldCom rival in $5bn rescue bid

AMERICAN telecoms group IDT has stepped in with a £$5bn (£3.3bn) rescue offer for its scandal-hit rival WorldCom after the stricken group's chief issued a public plea to keep it out of bankruptcy.

In his first statement since a $4bn (£2.7bn) accounting black hole was found at the telecoms giant, chief executive John Sidgmore called on 'customers, suppliers, lenders and the American people' to give WorldCom a chance to prevent it going to the wall despite a share price reduced to pennies.

Sidgmore, who took over WorldCom just two months ago, said the company was in a position to avoid a Chapter 11 filing for protection from its creditors with sales of non-core assets and a $2bn cash cushion, as long as lenders helped out.

He said WorldCom's next $2bn interest payment on its $30bn debt was not due until early next year and major lenders were working on a restructuring plan. A proposal from the banks could come as early as this week.

'The banks know they will do far worse with us in bankruptcy than out of it,' he said, using the 'too big to fail' argument that has prompted Washington to bail out big American companies in the past. 'America has a major stake in our survival,' he declared, pointing out that the company is the largest internet carrier, handling half the world's emails. 'We play a vital role in America's telecommunications infrastructure.'

Overnight, however, it emerged that New Jersey-based IDT which has become something of a specialist in picking up distressed telecoms company assets, is prepared to make an offer for WorldCom's long distance and local telephone businesses. But the proposals included few details and made no comment on how WorldCom debt holders would be treated.

Sidgmore blamed the hole in WorldCom's 2001 and 2002 accounts on former chief financial officer Scott Sullivan, once hailed as one of the brainiest CFOs in US telecoms. Sullivan was the central person to whom WorldCom's 75 diverse operations reported, he said. 'WorldCom is a far flung organisation and no single unit knows what is going on in the others,' he said. 'It all came together at Scott Sullivan's office.'

Asked whether former chief executive Bernie Ebbers was aware of the accounting fraud, Sidgmore said: 'We don't know whether he was involved and we don't know whether he wasn't involved.'