Redback expects to exit bankruptcy Jan. 6

A federal bankruptcy court in Delaware has approved Redback Networks’ pre-packaged reorganization plan, prompting the access equipment vendor to predict it will emerge from bankruptcy Jan. 6, 2004.

Redback filed Chapter 11 bankruptcy on Nov. 3 after failing to establish a quorum of 90 million shareholder votes in support of its reorganization plan, an outcome Redback’s vice president of marketing and business development Shailesh Shukla blamed on low shareholder participation in the proxy vote held in October.

The proposed plan includes a debt-for-equity exchange that essentially will eliminate the company’s $467 million debt load. It will give bondholders 95% of the company’s equity, leaving Redback’s existing 90,000 common stockholders with, collectively, 5% of the company. But if and when the company’s valuation rises to $250 million and later $500 million, those shareholders will have the option to exercise warrants that would raise their stake to 10% and 15%, respectively.

The plan also includes a 73-to-1 reverse stock split meant to raise the share price and give the company a total stock base of about 50 million shares.

Last month Shukla pointed to Redback’s 23% sequential revenue increase in the third quarter as evidence that the company’s business model will require no significant changes after it emerges from bankruptcy.