MCI faces recovery bill of £120m

MCI, the US telecoms carrier emerging from scandal-hit WorldCom, faces a bill that could top $200m (£120m) from advisers involved in rescuing the company from bankruptcy.

This would propel MCI to the top of the world league in corporate rescue costs - easily outstripping the £88m final bill for saving Britain's Marconi - at least until fraudulent Texan energy trader Enron tots up the cost of its own company restucturing. Enron is thought to be staring at a running bill of up to $500m for being saved as a going concern and NTL up to £120m.

'With all the court-retained lawyers, financial advisers and accountants, the MCI bill is likely to run into several hundred of millions of dollars - $150m to $200m is ball park,' said an adviser involved in the process.

Advisers for MCI and its creditors are 'putting the final touches to their bills' which will be submitted for court approval once the company files a revised set of accounts, expected by the end of the year. This will trigger the carrier's formal exit from bankruptcy.

WorldCom, founded by disgraced former chief executive Bernie Ebbers, filed last year for bankruptcy protection from creditors under Chapter 11 after revealing it had fabricated $11bn of profits.

Former finance director Scott Sullivan has been indicted for fraud. Los Angeles-based Houlihan Lokey Howard & Zukin, financial adviser to the creditors committee, could earn up to $75m, according to estimates by sources involved in the process, thanks to a flat monthly charging rate 'boosted considerably by a success-related bonus', one source said.

MCI's advisers at Lazard in New York and London are set to earn nearly as much through a similar deal, sources said.

MCI has cut its debt from $30bn to $5.7bn while creditors have earned anything 'from 36 cents to 80 cents on the dollar' in the deal.

Lawyers Akin Gump, for the creditors, and Weil, Gotshal & Manges, for the company, are likely to earn only a little less than the financial advisers as their pay-by-the-hour pay regime means the restructuring negotiations will have ratcheted up costs. By way of comparison, Marconi had to pay its lawyers, City-based Allen & Overy, about £25m out of the £88m total advice bill for completing a £4bn debt-for-equity swap this year.

All of MCI's fees, including those from the array of banks, bondholders and trade debtors that make up the creditors' committee, will be paid by the company.

'At least the fees will be far less than Enron,' one adviser said.