Galaxy Telecom executives plan to take the company into Chapter 11 with a pre-packaged bankruptcy plan that will shed convert most of the company's bond debt into equity.
CFO J. Keith Davidson said that the company's major debt holders have signed off on a plan that would convert two-thirds of Galaxy's $120 million in outstanding junk bonds into equity. The remaining $40 million in bonds wouldn't require cash interest payments. Holders would get more bonds that could be cashed in later. An existing $25 million bank loan package would remain in place.
At the end of the day, the bondholders would control 97% of the company's equity, the banks, let by Fleet, would be made whole and current equity holders would be nearly wiped out. But instead of servicing $145 million in debt with cash interest, Galaxy's rural cable systems would only have to support $25 million and eventually generate enough cash flow to support refinancing of the junk bonds.
"It puts the company in a much much better situation," Davidson said. It could take 60 days to secure approvals from all creditors and equity investors.
- John M. Higgins
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