Redback Networks filed a pre-packaged plan of reorganization under Chapter 11 of the U.S. Bankruptcy Code. The plan would eliminate $467 million in existing debt and reduce operating expenses by a third by relieving real estate obligations in exchange for new equity in the company. Existing shareholders would retain an estimated 5 to 15% of the company. Its plan also calls for a 73:1 reverse split in order to preserve its listing on NASDAQ.
In July 2003, Redback Networks presented the plan to its creditors, who voted overwhelmingly for its approval. The plan was presented to shareholders, who also accepted the out-of-court plan. However, Redback was unable to obtain the required quorum and has now presented the pre-negotiated restructuring proposal to the bankruptcy court. Redback expects to emerge from the Chapter 11 process as a restructured company in possibly as few as 60 days.
During the period of reorganization, Redback expects its business operations to continue as usual. Kevin DeNuccio, president and CEO of Redback, said that by virtually eliminating existing debt and achieving a new financial model, the Chapter 11 process would greatly reduce “the hurdles to reaching profitability, and easing concerns surrounding our balance sheet.”http://www.redback.com
