WorldCom Creditor Aligns With Guiliani

First they got Capellas--now Rudy?

Former New York Mayor Rudolph Giuliani last week confirmed that his consulting firm, Giuliani Partners, is working with one of WorldCom's largest investors to raise $1.3 billion to buy WorldCom bonds. Distressed-debt investor David Matlin's MatlinPatterson Asset Management is trying to buy enough WorldCom bonds to block creditor plans it doesn't like and possibly install Giuliani as chairman.

WorldCom, which is trying to emerge from the largest bankruptcy filing in U.S. history, is preparing to submit its reorganization plan to creditors who have put their support behind chairman and CEO Michael Capellas, the former Hewlett-Packard president who joined WorldCom Nov. 15.

If Matlin accrues 33% of WorldCom bonds, he could gain more voting power--he's reportedly purchased about 10% of WorldCom's $25 billion debt. Giuliani is reportedly interested in serving as a nonexecutive chairman of WorldCom.