Opinion
Case No. 02-13533 (AJG), (Jointly Administered)
February 18, 2003
Upon the motion dated February 14, 2003 (the "Motion") of WorldCom, Inc. and certain of its direct and indirect subsidiaries, as debtors and debtors in possession (collectively, the "Debtors"), for an interim order (the "Order") pursuant to sections 362 and 105(a) of title 11, United States Code (the "Bankruptcy Code") (i) establishing notification procedures and approving restrictions on certain transfers of claims against and interests in the debtors and (ii) scheduling an interim hearing pursuant to the case management order, as more fully described in the Motion; and the Court having jurisdiction to consider the Motion and the relief requested therein pursuant to 28 U.S.C. § 157 and 1334 and the Standing Order of Referral of Cases to Bankruptcy Court Judges of the District Court for the Southern District of New York, dated July 19, 1984 (Ward, Acting C.J.); and consideration of the Motion and the relief requested therein being a core proceeding pursuant to 28 U.S.C. § 157(b); and venue being proper before this Court pursuant to 28 U.S.C. § 1408 and 1409; and due and proper notice of the Motion having been provided pursuant to this Court's case management order dated December 23, 2002, and no other or further notice need be provided; and the relief requested in the Motion being in the best interests of the Debtors and their estates and creditors; and the Court having reviewed the Motion; and the Court having determined that the legal and factual bases set forth in the Motion establish just cause for the relief granted herein; and upon all of the proceedings had before the Court and after due deliberation and sufficient cause appearing therefor,
IT IS HEREBY FOUND THAT:
A. The Debtors' consolidated net operating loss ("NOL") carryforwards are property of the Debtors' estates and are protected by the automatic stay prescribed in section 362 of the Bankruptcy Code.
B. Unrestricted trading by creditors in claims against and stockholders in interests in the Debtors prior to the Debtors' emergence from chapter 11 could severely limit the Debtors' ability to utilize their NOL carryforwards and certain other tax attributes for U.S. federal income tax purposes, as set forth in the Motion.
C. The interim procedures requested in the Motion to notify holders of claims against and interests in the Debtors that (i) certain sales or transfers of claims against or interests in the Debtors are enjoined by virtue of the automatic stay and (ii) certain procedures must be satisfied before the sale or other transfer of certain claims against the Debtors may be deemed effective, are necessary and proper in order to preserve the Debtors' NOL carryforwards and certain other tax attributes pending final approval of the requested procedures and are therefore in the best interests of the Debtors, their estates, and their creditors.
D. The relief requested in the Motion is authorized under sections 362 and 105(a) of the Bankruptcy Code.
E. The Court shall cause the entry of this Order on the electronic case docket as soon as practical, the Court having made a temporary case docket because the bankruptcy court is otherwise closed due to the inclement weather.
THEREFORE, IT IS ORDERED THAT:
1. The Motion is granted on an interim basis until an interim hearing can be held.
2. Until further order of this Court to the contrary, any sale or other transfer in violation of the procedures set forth in the Motion shall be null and void ab initio as an act in violation of the automatic stay prescribed in sections 362 and 105(a) of the Bankruptcy Code.
3. Any person and any entity within the meaning of Section 382 ("Entity") is stayed, prohibited, and enjoined, pursuant to sections 362 and 105(a) of the Bankruptcy Code, (i) in the case of a person or Entity who does not Own (as defined below) any class of Stock, or who Owns less than 4.75% of each class of Stock, from purchasing, acquiring, or otherwise obtaining Ownership of an amount of any class of common stock or preferred stock of WorldCom, Inc. (the "Stock") which, when added to such person's or Entity's total Ownership of such class of Stock, if any, equals or exceeds 4.75% of such class of Stock, or (ii) in the case of a person or Entity who Owns at least 4.75% of any class of Stock, from purchasing, acquiring, or otherwise obtaining ownership of any additional shares of Stock.
4. Any person or Entity that proposes to purchase, acquire or otherwise obtain Ownership, and any other person or Entity who by reason of such transaction would obtain Ownership, of general unsecured claims against the Debtors (including claims incurred in the ordinary course of business and all debt securities issued by WorldCom, Inc. or its debtor subsidiaries MCI Communications Corporation and Intermedia Communications Inc.) or preferred securities issued by MCI I, MCI II, MCI III and MCI IV (i.e., the QUIPS), which are treated for federal income tax purposes as indebtedness of the Debtors, (all such claims and securities are hereinafter referred to as the "Restricted Securities") that, when added to that person's or Entity's prior Ownership of Restricted Securities, would Own an aggregate amount of Restricted Securities that equals or exceeds $750 million (including principal and accrued interest as of the Commencement Date) must, at least twenty (20) days before any such transaction, file with this Court and serve on the Debtors and their attorneys a notice in the form annexed as Exhibit "E" to the Motion; provided, however, that a person or Entity will not be subject to such notice requirement with respect to its Ownership of bonds of WorldCom, Inc. issued in May 2001 if such person or Entity has not acquired and retained Ownership of any other Restricted Security since January 21, 2001. The prospective transferor shall join in such filing or may make a separate filing. The Debtors will then have twenty (20) days after receipt of a joint filing, or in the event of separate filings, the later of such filings to object to such transaction. If the Debtors file an objection, then the transaction will not be effective unless approved by a final and nonappealable order of this Court. If the Debtors do not object within such twenty (20) day period, then such transaction may proceed solely as set forth in the notice. Further transactions within the scope of this paragraph must be the subject of additional notices as set forth herein with an additional twenty (20) day waiting period. If the Debtors voluntarily advise such person or Entity in writing prior to the 20th day that they do not object, the person or Entity may proceed then to acquire the subject claims.
5. For the purposes of this Order, "Ownership" of a claim against, or stock of, the Debtors shall be determined in accordance with applicable rules under section 382 of the Internal Revenue Code and, thus, shall include, but not be limited to, direct and indirect ownership (e.g., a holding company would be considered to beneficially own all shares owned or acquired by its subsidiaries), ownership by members of such person's family and persons acting in concert, and in certain cases, the creation or issuance of an option (in any form), and (ii) any variation of the term "Ownership" (e.g., Own) shall have the same meaning.
6. The Debtors may waive, in writing, any and all restrictions, stays, and notification procedures contained in the Motion.
7. An interim hearing to determine whether the procedures described in the Motion should be continued until a final hearing will be held on February 19, 2003 at 12:00 noon or as soon thereafter as practicable.
8. The Debtors shall serve a notice of the entry of this Order, on (i) the Service List, as identified in the Case Management Order dated December 23, 2002 (the "Case Management Order"), and (ii) any indenture trustee(s) or transfer agent(s) for the Restricted Securities or Stock, as applicable. Additionally, the Debtors propose to post the notice on the Independent Website (www.elawforworldcom.com) established by the Case Management Order for posting of documents in the Debtors' cases.
9. The requirements set forth in this Order are in addition to the requirements of Rule 3001(e) of the Federal Rules of Bankruptcy Procedure and applicable securities, corporate, and other laws, and do not excuse compliance therewith.
10. The relief granted in this Order is intended solely to permit the Debtors to protect, preserve and maximize the value of their NOL carryforwards and certain other tax attributes. Accordingly, except to the extent this Order expressly conditions or restricts trading in claims against and interests in the Debtors, nothing in this Order or in the Motion shall or shall be deemed to prejudice, impair or otherwise alter or affect the rights of any holders of claims against or interests in the Debtors, including in connection with the treatment of any such claims or interests under any plan of reorganization.
11. The requirement under Rule 9013-1(b) of the Local Bankruptcy Rules for the Southern District of New York for the filing of a memorandum of law is waived.