Flag Telecom Files for Bankruptcy
biz.yahoo.com
Friday April 12, 5:10 pm Eastern Time
Reuters Technology
PHILADELPHIA (Reuters) - Flag Telecom Holdings Ltd. (NasdaqNM:FTHL - news; FTHLq.L) on Friday said it filed for bankruptcy protection, becoming the latest high-speed network operator to buckle under mounting debt amid the industry's glut of network capacity and slumping demand.
Flag, which operates a global, undersea communications network, said its board authorized the bankruptcy filing after a syndicate of banks sped up repayment of bank debt owed by its Flag Atlantic Ltd. unit. That, in turn, triggered a cross default on its outstanding senior notes, the company said.
The Chapter 11 bankruptcy filing comes less than two weeks after Flag's auditor expressed doubt about the company's ability to continue doing business. On Wednesday, Flag announced a debt restructuring proposal and said it would try to negotiate with certain creditors.
Bermuda-based Flag said on Friday that if it reaches an agreement with them, it would file a reorganization plan with the court outlining plans for the company to emerge from bankruptcy. Its slide into bankruptcy came just two years after it raised about $570 million in its initial public offering. The stock hit a high of $44 in February 2000, and crumbled to close on Friday at 10 cents on Nasdaq.
Flag had $3.3 billion in assets, and $2.60 billion in debts as of March 31, according to documents filed with the U.S. Bankruptcy Court for the Southern District of New York.
The telecommunications industry has been slammed by slowing demand for data and voice transmission services in the weak economy. Stiff competition, price wars and a glut of network capacity has compounded these woes.
The once-booming industry now is littered with bankrupt carriers such as Global Crossing Ltd. (Other OTC:GBLXQ.PK - news) and McLeodUSA Inc. (NasdaqNM:MCLDQ - news), 360networks Inc., Viatel Inc., Winstar Communications Inc. and PSINet Inc.
Last month, fiber-optic company Adelphia Business Solutions Inc. (Other OTC:ABIZQ.PK - news) also filed for bankruptcy, citing a ``virtual shutdown of the telecommunications capital markets.''
Flag said it will continue to provide network capacity to its customers, which include telecom carriers, Internet service providers and other content providers. It said it would conserve capital and reduce costs ``where appropriate.''
The company is backed by publicly traded companies such as local telephone giant Verizon Communications (NYSE:VZ - news), which owned 18.6 percent of the company as of December 31, and conglomerate Tyco International Ltd. (NYSE:TYC - news), which owned 11.2 percent, according to the bankruptcy filing.
Flag's largest unsecured creditors include Bank of New York, York Capital Management and Colonial Management Associates Inc., court papers said. |
