FLAG Telecom Holdings Ltd., the owner of a global fibre-optic network, has filed a plan to reorganise its finances in a New York bankruptcy court, the company said yesterday.

The company, which is based in Bermuda, filed for Chapter 11 protection in April as it continued operations. FLAG's principal creditors approved the main points of the restructuring plan and the company hopes to complete the reorganisation by September.

"The company believes that it can emerge from Chapter 11 and related proceedings with its global network intact, with a major reduction of its financial indebtedness and a reduced operating expense level that will still enable FLAG Telecom to service its customers," a release said.

Flag's largest unsecured creditors include Bank of New York, York Capital Management and Colonial Management Associates Inc., according to court papers filed in April.

Sixty-three percent of the stock in the reorganised FLAG would be given to holders of the company's bond issues.

Banks who lent money to FLAG Atlantic Ltd., a subsidiary also incorporated in Bermuda, would receive a 26 percent stake in the new company.

Certain significant trade creditors, such as Alcatel, the French telecommunications equipment maker, would receive notes, stock in the reorganised company and cash.

Trade creditors of FLAG Atlantic Holdings, other than Alcatel, would receive their pro rata rights to preference actions.

Other creditors would be dealt with according to individual agreements with FLAG.

The company was originally backed by publicly traded companies such as local telephone giant Verizon Communications, which owned 18.6 percent of the company as of December 31, and conglomerate Tyco International Ltd., another company incorporated in Bermuda, which owned 11.2 percent, according to the bankruptcy filing. "FLAG Telecom has worked diligently in intensive and complicated negotiations with representatives of all of its major creditor groups to present this plan to the court today," said Stefan Feuerabendt, the managing director of The Blackstone Group, FLAG's financial advisor.

He said the plan would significantly reduce the company's debt.

FLAG was one in a long line of telecommunications companies to buckle under mounting debt amid industry-wide overcapacity and slumping demand.

FLAG - an acronym for "fibre-optic link around the globe" - sells capacity on its network to international telecommunications carriers, Internet service providers and other companies.