WorldCom, Inc. (HSBC)

February 28, 2004

      Compass Advisers, LLP ("Compass") provided financial advisory services to HSBC Bank USA ("HSBC") and its counsel, Pryor Cashman Sherman & Flynn LLP ("Pryor Cashman"), in association with the Chapter 11 restructuring of WorldCom, Inc. ("WorldCom"), then the nation's second largest long distance phone company and operator of the world's largest internet network.  HSBC was the successor Indenture Trustee for a group of Series A 8.00% Junior Subordinated Debentures in the aggregate principal amount of $773,195,900 issued by MCI Communications Corporation ("MCI"), one of the debtors in the WorldCom bankruptcy cases.

      WorldCom had been struggling for years with $41  billion in debt, $24 billion of which was in bonds.  In June 2002, WorldCom revealed that it had incorrectly accounted for $3.8 billion in operating expenses, and many of its banks refused to provide the company with additional financing unless it was secured with WorldCom assets.  The company lined up $2 billion in debtor-in-possession financing that would allow it to operate while in bankruptcy, and WorldCom filed Chapter 11 in July 2002.  With $107 billion in assets at the time of filing, WorldCom's bankruptcy was at that time the largest in United States history.

      Compass was engaged by Pryor Cashman toward the end of the bankruptcy proceedings to provide analytical and strategic support to counsel in preparation for litigation.  Compass analyzed transactions between MCI and the rest of WorldCom in order to evaluate the net transference of value between these institutions, provided a detailed report to counsel, and advised counsel on negotiating tactics.  Compass' analysis indicated that, as part of a post-acquisition tax strategy, WorldCom had transferred, without compensation, nearly all the intellectual property from the MCI entities and used this as basis for charging the MCI entities royalties and other fees.  These transfers formed the basis for substantive intercompany claims by the MCI entities, providing the foundation for a negotiated settlement that greatly enhanced recoveries for the MCI bondholders.

      Compass' input helped to successfully prevent an extended legal action and facilitated a negotiated settlement, transforming a potential zero recovery to a very significant recovery for MCI bondholders.  A plan of reorganization detailing this recovery was confirmed by the bankruptcy court, and WorldCom emerged as MCI on April 20, 2004.