US rating agencies slashed their assessment of the long-distance telephone company's debt to "junk" status after becoming concerned about its performance.
The company also said that it would cut its investment program by $1bn in an attempt to shore up its shaky finances.
WorldCom has about $32bn in both bond and bank loan debt, amassed during an acquisition spree over two decades.
Shares in the company fell by as much as 15% on Thursday, before recovering some of their value.
The shares closed 43 cents down on Friday at $1.58, a decline of 21%.
Putting on a brave face
WorldCom maintained that the ratings cut would not affect its liquidity - in other words the cash it has at its disposal.
"The downgrade has no impact on the liquidity of our bonds or on our bank credit facilities, period," said Scott Sullivan, chief financial officer.
But analysts said that the ratings downgrade was a problem for the company because it would push up borrowing costs.
The move could also force some investors to sell WorldCom bonds because investment restrictions may prevent them from holding junk-rated debt.
"This is a real blow to WorldCom," said Patrick Comack, an equity analyst at Guzman & Co. in Miami.
"This could be the first domino of a liquidity crisis."
Just junk
Moody's Investors Service cut the company's senior unsecured debt by three notches to its second highest junk grade of "Ba2".
It cited the company's deteriorating operating performance, enormous debt load and expectations of further weakness.
Last month the company's colourful chief executive, Bernie Ebbers, resigned following a collapse in the company's share price and investigations into his personal finances.
The shares have fallen 89% in the last year.
He was replaced by WorldCom's vice chairman John Sidgmore, formerly the head of the company's internet unit UUNet.
Fitch IBCA also cut its debt rating on Thursday and Standard & Poor's is threatening a downgrade.
WorldCom's shares closed down 6.5% at $2.01 on Thursday, after falling as low as $1.82.