FLAG Telecom Files for Bankruptcy Under Chapter 11

The Bermuda-based FLAG Telecom has announced that it has filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York. Certain subsidiaries of the company have also filed voluntary petitions under Chapter 11.

This action was taken after the Board of Directors authorized the filing of the Petition by unanimous vote. The Board’s action was taken following the acceleration of the bank debt of FLAG Atlantic Ltd by the syndicate of banks which are its lenders, which constituted a cross-default under the company’s indenture for its outstanding senior notes.

The release said that the Board of Directors has authorized FLAG Telecom’s management and advisors to negotiate with certain creditors, including representatives of the FLAG Telecom Atlantic Bank Group, holders of its various Senior Notes, and significant trade creditors, regarding a comprehensive financial restructuring. FLAG Telecom will attempt to reach agreement with these representatives regarding the material terms of a financial restructuring in the coming weeks. If and when such an agreement is reached, a plan of reorganization will be filed with the court, and, when approved, will allow the company to emerge from Chapter 11 with a deleveraged balance sheet and a strong operational base.

According to the release, FLAG intends to manage its business in a focused manner, conserving capital and reducing costs where appropriate. It will continue to provide core backbone capacity to traditional carriers, Internet Service Providers and other content providers.

Flag Telecom was recently allowed by the government of India to sale bandwidth to private operators and its exclusivity with VSNL ended. When contacted Neeraj Gupta, Director, SAARC, Flag Telecom refused to offer any comments and said "We are studying the implications." 

Sudesh Prasad