Covad to Come Out of Bankruptcy Next Week
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Bucking a trend in the high-speed Internet business, Covad Communications Group Inc. said it plans to emerge from bankruptcy proceedings Thursday.
A U.S. Bankruptcy Court in Delaware approved Covad’s reorganization plan, which erases $1.4 billion of high-yield and convertible bondholder debt. Covad, like other broadband providers, ran into trouble last year as sources of capital dried up while the companies were in the midst of rapidly expanding their networks.
Bondholders will get about $270 million in cash as well as a 15% ownership stake in the new company. Existing shareholders’ ownership will fall to about 80%. The remaining 5% was distributed as part of settlements in various lawsuits.
Exiting bankruptcy was a condition of Covad’s recently announced $150-million deal with SBC Communications, which is purchasing Covad services for 10 years.
Shares of Covad more than doubled, jumping 77 cents to $1.52 on the OTC bulletin board. The firm was delisted from the Nasdaq Stock Market in July.
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