By Ryan Naraine
New York-based Web hosting firm Globix Corp. (NASDAQ:GBIX) has finally filed for Chapter 11 protection under a pre-approved plan and said it expects to emerge from bankruptcy within two months.
On Monday, Globix officially filed for Chapter 11 bankruptcy protection from creditors under a previously-announced plan to reduce its debt by approximately $480 million.
The company, which has been struggling to cope with to lease terminations, severance packages, bad debts and troubles with suppliers, struck a deal with bondholders last month that led to the bankruptcy filing.
Under terms of the pact,, Globix bondholders (who own more than 51 percent of the company’s outstanding $600 million of 12-1/2 percent senior notes) will exchange those senior notes for $120 million and a substantial equity position.
The notes, due in 2008, carry an interest of 11 percent and will reduce annual interest payments by about $75 million. Globix said its preferred shareholders have also agreed to this plan.
In a statement, Globix said it was also negotiating a deal to get rid of an expensive lease in the U.K. The company has reached an agreement in principle to return four floors space it was not using by the end of September this year.
“It is anticipated that a portion of the Company’s rent deposit may have to be forfeited in connection with any such agreement,” Globix said.
Globix said the bankruptcy filing would not affect its Web hosting operations. “(We) intend to seek the necessary relief from the Bankruptcy Court to pay employees, trade, and certain other creditors in full and on time, regardless of whether such claims arise prior to or after the Chapter 11 filing,” the company said.