Worldcom Inc, the No 2 US long-distance telephone company, reached an agreement with creditors allowing it to emerge from America's biggest bankruptcy by year-end, said a person familiar with the matter.

　　WorldCom, which filed for bankruptcy protection in July with US billion of debt, will outline a reorganization proposal with the US Bankruptcy Court, the person said. The company would be valued at US billion, including US billion of debt.

　　Chief Executive Officer Michael Capellas forged an accord with WorldCom's creditors over the weekend that should allow the restructured company to compete against rivals such as AT&T Corp in a marketswhereslong-distance telephone revenue is declining. With reduced debt and cost cuts, WorldCom may be able to gain customers by offering lower prices than its competitors, analysts have said.

　　"Even though there are plenty of challenges, it looks like Capellas has a good grasp of what needs to be done for the company to emerge as a competitor," said Jeffrey Kagan, an independent telecommunications analyst in Atlanta.

　　WorldCom reached agreement with a committee representing creditors including Metropolitan West Asset Management and Electronic Data Systems Corp. Bondholders such as MatlinPatterson Global Advisors LLC, Silver Lake Partners LP and Bain Capital LLC also agreed to the plan, the person said. WorldCom had until this week to provide the court with a plan for exiting bankruptcy without the threat of competing proposals from creditors.

　　"We're on track to file our plan," said WorldCom spokeswoman Claire Hassett.

　　WorldCom, which had a market capitalization of more than US billion in 1999, filed for bankruptcy after uncovering overstated profits that have so far reached US billion, according to people familiar with the matter.

　　Founder Bernard Ebbers resigned a year ago and a criminal case is pending against former Chief Financial Officer Scott Sullivan. He has pleaded not guilty to securities-fraud charges related to the company's accounting.

　　Clinton, Mississippi-based WorldCom plans to change its name to MCI, after the MCI Communications Corp long-distance unit it bought in 1998, and move its headquarters to Ashburn, Virginia, said people familiar with the matter.

　　Bonds of WorldCom have risen to about 28 US cents on the dollar, an indication of what holders expect to receive in the reorganization. That's more than twice their level when the company filed for Chapter 11 protection. The bonds of its MCI consumer long-distance unit, which is more profitable than the rest of the company, sell for about 73 US cents on the dollar.

　　WorldCom's bankruptcy has cost it customers. New York-based AT&T said in February it won US.7 billion in contracts since July from customers of WorldCom and other "distressed" rivals.

　　Sales in January were US.16 billion, down 12 percent from six months earlier. The company gets most of its sales from serving corporations such as Johnson & Johnson and Wal-Mart Stores. It operates the world's largest network for transmitting data over the Internet.

　　Capellas plans to slash annual costs by US.5 billion, in part by cutting jobs and closing offices. WorldCom has about 55,000 employees after announcing in February it would eliminate 5,000 positions.

　　That should help WorldCom compete with AT&T and Sprint Corp., both of which have more debt to pay off, analysts said.