Debt-laden Teleglobe announced Wednesday it will cut 850 jobs – almost half of its staff – as the company filed for and was granted bankruptcy protection to give it time to restructure its operations under a new CEO.

The troubled long-distance voice and data communications company said half the job cuts will be in the United States and 15 per cent in Canada. Most of the cuts are related to Teleglobe's decision to get out of the Internet hosting business and some portions of its data transmission business.

The company said the move will free it from the high costs of its recently-built infrastructure, primarily developed to support the soon-to-be discontinued data and hosting operations.

Teleglobe was saddled with $4 billion in debt.
Teleglobe was saddled with $4 billion in debt.

In Toronto, Judge James Farley of the Ontario Superior Court of Justice granted the company's request for creditor protection under the Companies' Creditors Arrangement Act. Teleglobe is saddled with a $4 billion debt, including a $1.25 billion US bank loan due to mature in July.

Bankruptcy protection filings are also being made in the United States and in the United Kingdom.

Teleglobe also announced that John Brunette is its new chief executive officer. Brunette was previously the company's executive vice president and chief administration officer. Charles Childers, the former president, has resigned.

"Our primary objective is to maximize the value of the company for all stakeholders," Brunette said in a release.

"This strategy allows us to be free of a financial burden and focus on our core business, which has been built over a 50-year period," he said.

Teleglobe said it will concentrate on its core voice and data transmission business, which employs about 600 people and will be headquartered in Montreal.

The company said the business generated about $750 million US of the company's $1.3 billion US in revenues last year. The business is expected to be self-funding once it exits its discontinued operations.

The revamped Teleglobe is expected to employ a total of about 950 people.

Teleglobe hung heavily on BCE

On April 24, BCE Inc. cut off long-term funding to Teleglobe and said it would give up on the company and take a charge of up to $8.5 billion.

As part of its restructuring announcement, Teleglobe said BCE will give it $100 million US in short-term financing to support its core operations and to pay employee wages and benefits.

BCE used mostly stock when it paid $7.4 billion in late 2000 to acquire the 77 per cent stake of Teleglobe it didn't already own.

But Teleglobe's financial problems hung like a weight on BCE, and ultimately contributed to the resignation of Jean Monty as the head of BCE.

Teleglobe's failure will not be largest bankruptcy filing in Canadian corporate history. The collapse of the Reichmann's Olympia & York Developments with $14 billion in debt holds that dubious distinction.