(DOW JONES NEWSWIRES WASHINGTON) - Flag Telecom Holdings Ltd. is seeking a bankruptcy court's authority for a cost-reduction programme under which the company would reduce its work force by about 50 percent, according to a motion Dow Jones Newswires obtained.

In connection with its global cost-reduction programme, Flag Telecom wants the court to OK severance payments and to authorise a key employee retention plan for some of its workers other than senior management.

The retention plan would be an effort to keep the rest of the work force "in the context of the significant proposed layoff," the motion said.

Flag Telecom, of Bermuda, estimated the cost-reduction programme would bring annual savings of about $23 million. The filing said that employee costs represent about $58 million a year in Flag Telecom's budget.

The company's budget makes provisions for about 425 employees, but not all positions are filled, the motion said. The average budgeted annual cost per worker - including salary, bonuses and employee-related expenses - is roughly $135,000.

The telecommunications concern conducted "extensive analysis, consultation with financial advisers, negotiations with key creditor constituencies as to potential capital structures" for a reorganised Flag Telecom and, "ultimately, consultation among officers and with the board of directors", the company said.

The US Bankruptcy Court in Manhattan has scheduled a hearing on the matter for May 23. Objections are due by Monday.

The motion said that a portion of Flag Telecom's cash on hand will be used to fund payments to creditors under a reorganisation plan, so that cash won't be available to fund current operations. The company also doesn't expect "significant ongoing revenue collection for the remainder of 2002" as a result of "current economic conditions and in light of the impact of" the company's Chapter 11 filing.

Flag Telecom acknowledged there would be some one-time up-front expenses inherent in the reduction programme. As such, the company is seeking court approval to pay those unspecified expenses and fund them with Flag Telecom cash.

The proposed cost-reduction programme would call for Flag Telecom to close some offices outright and significantly downsize operations at others.

Although the company hasn't yet identified specific employee positions that would be eliminated as part of the plan, "the effects of the programme will likely span the globe and could involve employees in the Netherlands, Thailand, China, Belgium, Egypt, England, Denmark, the United Arab Emirates, Ireland, Germany, Hong Kong, Spain, India, France, Italy, Korea, Singapore, Taiwan, Japan and the United States", the motion said.

In the motion, Flag Telecom estimated total severance payments under the cost-reduction programme would total about $7 million.

The company initiated an employee retention plan before it filed for bankruptcy on April 12, and almost all the payments were made before the petition date. However, 18 employees, who are owed a total of $750,000, didn't receive their payments. Flag Telecom believes it's "critical" to make those payments to retain key workers.

Separately, US Bankruptcy Judge Allan L. Gropper on Monday for a second time granted interim authorisation for Flag Telecom to provide funds to some of its subsidiaries to keep its global network operating. The parent company will provide cash under terms of a term sheet and budget.

The court scheduled a final hearing on that mater for May 29.

Flag Telecom and four subsidiaries filed for Chapter 11 bankruptcy on April 12. The parent company listed total assets of about $3.3 billion and total debts of nearly $2.6 billion as of March 31 in its bankruptcy petition.

In another filing, subsidiary Flag Ltd. cited roughly $1 billion in total assets and about $798.3 million in total debts.

Five other Flag Telecom units filed for Chapter 11 protection on April 23.

Flag Telecom provides high speed broadband global network services and is a carrier for independent carriers. It also uses its network service products to address the needs of application service providers, Internet service providers and multinational corporate customers.