Creditors Force Telemundo to File for Chapter 11 : Television: Rapid expansion by America’s No. 2 Spanish-language network strained its cash flow, leaving broadcaster $300 million in debt.

Telemundo Group Inc, the Spanish-language TV network controlled by New York investor Saul Steinberg, filed for Chapter 11 bankruptcy Friday and said it had reached a restructuring plan with its largest creditors.

Telemundo is one of America’s two leading Spanish-language broadcasters and was supposed to ride the wave of rising Latino media advertising when Steinberg’s Reliance Group Holdings took control of the company in 1986.

But despite above-average growth for Latino television in the United States, the rapid expansion of Telemundo strained the broadcaster’s cash flow. Last month, a bondholder group petitioned the U.S. Bankruptcy Court to force it into Chapter 11 proceedings.

Telemundo, which owns KVEA-TV, Channel 52 in Los Angeles, had been in reorganization talks with its creditors for more than a year and has about $300 million in outstanding debt. The bondholder group filed a bankruptcy petition last month in order to prevent those holding zero-coupon notes from accruing additional principal in lieu of interest payments.

Under the new arrangement with creditors, Telemundo will cancel all $300 million of outstanding debt inherited from previous owner Blair Communications in 1986, when the network was formed to compete with market leader Univision. In exchange, Telemundo will issue its creditors cash, new senior notes, reorganized common stock and warrants to buy more shares of the renewed company.

Spanish-language broadcasting is still seen as one of the few major growth areas left in U.S. television. Last year Univision was sold to Los Angeles businessman Jerry Perenchio and Mexico’s Grupo Televisa.

Both Telemundo and Univision are looking for opportunities to form joint ventures with other Spanish-language broadcasters to expand into the rapidly growing Latin American TV market.