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A group of investors who own notes of WorldCom Inc.’s MCI Group subsidiary filed a supplemental objection to the company’s DIP and cash management motions Friday, claiming that as written the proposals would harm MCI’s portion of the bankruptcy estate. WorldCom is scheduled to present its DIP agreement to U.S. Bankruptcy Judge Arthur Gonzalez in New York today. The pleadings filed by the MCI bondholders said that the proposed DIP would be $1.25 billion, though a source close to the proceedings said it might fall closer to $1 billion. While the objection does not seek to block the DIP motion, it does ask the court to amend the package to include stronger protections for noteholders of the MCI subsidiary. Lawyers for WorldCom recently announced in court that the company has about $1 billion in cash, up from about $200 million when the company filed for bankruptcy protection in July. In the objection filed by Kasowitz, Benson, Torres & Friedman, the group claimed that MCI is the source of the cash, “so when the debtors say that they want access to cash management, what they are saying is that they want to use MCI’s cash.” Three groups of bondholders have the largest chunk of WorldCom’s more than $40 billion in debt. The WorldCom holding company has about $24 billion in notes. MCI subsidiary investors have $2.6 billion in bonds and $750 million in preferred trust stock. The Intermedia Corp. subsidiary has about $1.2 billion in bonds and $574 million in preferred stock. So while MCI bondholders have a relatively low amount of the total face value of debt, they are asserting claims on some of the company’s most valuable assets. “If approved, the motions will subject MCI to the real threat that it will be financing insolvent or undercapitalized WorldCom affiliates,” the filing said, echoing previous statements by the group’s lawyers. The investors who have banded together in the objection includes a mixed range of firms: MW Post Advisory, Elliot Associates LP, New York Life Bank Securities Inc., Metropolitan Life Insurance Co., Perry Partners, Silver Point Capital, Deutsche Bank Securities Inc., Oaktree Capital Management LLC, Hawkeye Capital, Stark Investments and Angelo, Gordon & Co. WorldCom lawyers could not be reached for comment on the objection. Copyright �2002 TDD, LLC. All rights reserved.

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