Covad files for Chapter 11
Covad Communications Group Inc. fulfilled its Aug. 7 announcement, and filed for Chapter 11 bankruptcy by its self-imposed deadline. The move is part of Covad's pre-negotiated plan to eliminate its $1.4 billion debt and ensure all bondholders adhere to a debt repurchase agreement, pending court approval.
Covad says that the majority of its bond holders have agreed in writing to the terms of a debt repurchase, pending court approval. The filing would bind 100 percent of its bondholders to the transaction, it says.
"This filing is a tool to eliminate Covad's debt and significantly improve our ability to raise the additional capital we need to get to profitability," CEO Charles E. Hoffman says in a statement. The bankruptcy affects only the parent company, not its operating subsidiaries, which provide DSL services and which will operate under "business as usual," Hoffman says.
Covad says it expects the process to be complete and to emerge by January. Covad's shares are expected to start trading under COVDQ to reflect the filing.