Redback Goes Chapter 11

SAN JOSE, Calif. -- Redback Networks Inc. (NASDAQ: RBAK), a leading provider of broadband networking systems, today announced that it has filed a voluntary pre-packaged plan of reorganization under chapter 11 of the U.S. Bankruptcy Code as the concluding step in its process of financial restructuring first announced in July 2003. In connection with Redback's proposed out-of-court restructuring, an overwhelming majority of creditors and stockholders who voted, accepted the out-of-court plan, but Redback was unable to obtain the required quorum.

"Court approval of the prepackaged plan would remove existing debt of $467 million and reduce operating expenses by a third, greatly reducing the hurdles to reaching profitability, and easing concerns surrounding our balance sheet," said Kevin DeNuccio, president and chief executive officer of Redback Networks. "As we already have the affirmative votes from a majority of creditors, we expect the pre-packaged reorganization to move quickly. We look forward to a swift completion of the restructuring process we announced in July."

Business as Usual

During the period of reorganization, Redback expects its business operations to continue seamlessly and without interruption. In order to address ongoing capitalization needs, Redback has entered into a commitment letter for secured debt financing of up to $25M that would be used, if necessary to fund sales, marketing, product development and other expenses associated with business operations.

Last month, Redback reported its results for the third quarter 2003, showing that revenue had increased by 23 percent over the second quarter 2003 and 57 percent over the third quarter of 2002.

A Fast Process

Redback's major creditors include noteholders of $467 million in outstanding debt. Since over 99.97 percent of the voting noteholders accepted the plan, Redback believes it has the approvals required to complete the reorganization and conclude the process very quickly, possibly in as few as 60 days. Redback's minimum condition for the exchange offer was not satisfied.

This final step in the restructuring process comes at an opportune time, as the importance of DSL in the product portfolio of service providers is on the rise, and many major carriers around the world are currently contemplating their next-generation broadband DSL network architectures. By virtually eliminating existing debt and achieving a well-balanced financial model between revenue and expense, Redback will have the ability to more confidently address the long-term needs of existing and potential customers, and to participate fully in these new market growth opportunities.

Redback Networks Inc.