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Flag files plan of reorganization; banks, noteholders to receive most of stock
New York, July 3 - Flag Telecom Holdings Ltd. filed a plan of reorganization which gives holders of its notes and its bank creditors nearly all the stock of the company.
The Hamilton, Bermuda telecommunications company said it aims to emerge from Chapter 11 by September and added that it expects to exit from bankruptcy with its global network intact.
Flag said it believes it has agreement in principal among its principal creditors to support the "main economic provisions" of the plan.
Current equity holders will receive nothing under the proposed reorganization, which was filed with the U.S. Bankruptcy Court for the Southern District of New York.
Under the proposed plan, holders of FLAG Telecom Holdings' 11 5/8% senior notes would receive $245 million in cash, a $45 million promissory note callable at $30 million for 18 months and 5% of the common stock of the reorganized company.
Holders of FLAG Ltd.'s 8¼% notes will receive 63% of the common stock of the reorganized company.
Bank lenders under FLAG Atlantic Ltd.'s credit facility will receive 26% of the common stock of the reorganized company.
Certain significant trade creditors such as Alcatel, Reach and Ciena will have their agreements with FLAG amended and assumed and will receive other consideration including notes and common stock in the reorganized company.
Trade creditors other than those of Flag Atlantic Holdings and its subsidiaries will be paid in full or as agreed with Flag. Flag Atlantic trade creditors other than Alcatel will receive only their pro rata rights to preference actions.
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