Focal Communications emerges from bankruptcy

By Carlise Newman

Chicago, July 8 - Focal Communications Corp. said it completed its financial restructuring and emerged from Chapter 11 protection. The company's second amended reorganization plan obtained court approval on June 19, becoming effective six months after the initial plan was filed.

Focal said its strategy for the future includes increasing revenue per line, not just the total number of lines in service. The company's objective is to increase the efficiency of the network and improve gross margins through expanded product penetration into the existing customer base.

The company said it reported positive EBITDA of $7.3 million for the first quarter of 2003.

Key parts of Focal's reorganization include:

* Senior secured convertible noteholders, with $109.9 million in allowed claims, received 85% of $65 million of preferred equity;

* General unsecured creditors, including the unsecured bondholders, with $281.6 million in allowed claims, received three-year and five-year warrants to purchase up to 25% of the common stock of the reorganized company and also received 15% of the $65 million of preferred equity;

* Bank lenders, with $78 million in allowed claims, will be paid in full in cash;

* The board of directors of the reorganized company will consist of nine members, including five representatives designated by the senior secured convertible noteholders, two independent members, one representative designated by the general unsecured creditors, and Focal's chief executive officer; and

* Existing preferred and common shareholders and warrant holders will receive no distribution.

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