WorldCom case sparks due diligence drive
Banks will need to overhaul their due diligence procedures after WorldCom underwriters were forced to cough up $6bn to settle a lawsuit accusing them of misleading bondholders. Oliver Holtaway reports
Debt holders won a victory of sorts last month when the underwriters of WorldCom’s 2000 and 2001 bond issues made a $6 billion out-of-court settlement over a lawsuit that alleged the banks had failed to conduct proper due diligence and therefore exposed the bondholders to risk. But there are concerns that investment banks may now ramp up underwriting fees to offset future litigation risk. And some are questioning the extent to which underwriters should be liable for the behaviour of their issuer
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