Global Crossing accepts USD500m bid from Hutchison and ST Telemedia
9 August 2002 -- Global Crossing Ltd has cancelled a public auction after accepting a joint purchase bid worth USD500m from Hutchison Whampoa Ltd and Singapore Technologies Telemedia Pte.
9 August 2002 -- Bermuda-based telecoms company Global Crossing Ltd has cancelled a public auction scheduled for 14 August after accepting a joint purchase bid worth USD500m from the Hutchison Telecommunications Ltd subsidiary of Hong Kong-based conglomerate Hutchison Whampoa Ltd and government-owned Singapore Technologies Telemedia Pte (ST Telemedia).
Global Crossing spent USD7bn building the world's first integrated global IP-based fibre-optic network, which connects about 85,000 customers over 160,000km-long links between more than 200 cities in 27 countries. Global Crossing went public in 1998, and had a peak stock-market value of about USD48bn, but accummulated USD12.4bn in debt. On 28 January it filed for Chapter 11 bankruptcy protection -- at that time the fourth-largest bankruptcy on record.
Hutchison and ST Telemedia's initial offer of USD750m for 79% of Global Crossing's equity was rejected in May by creditors who estimated the assets to be worth USD22.4bn. But since then only three credible bids were received (despite the auction being postponed five times from July 24). Consequently, there had been speculations that Global Crossing would be broken up to repay its creditors (much like Amsterdam-based KPNQwest).
The new plan will give Hutchison and ST Telemedia 61.5% of the equity of the reorganised Global Crossing on its emergence from Chapter 11 (probably by January) in return for USD300m in cash and about USD200m in notes. The agreement has been supported by Global Crossing's creditor groups and approved by bankruptcy courts.
Global Crossing's banks, which lent it USD2.55bn, will get all the USD300m cash, USD175m of the notes and 6% of the equity in the newly reconstituted company. Bondholders, owed about USD10bn, will get USD25m in notes and 32.5% of the new equity. Existing shareholders will receive nothing.
Global Crossing will retain all of its three non-core businesses, which it had previously considered selling: its UK national business, its conferencing division, and Global Marine Systems (which provides submarine fibre cable installation and maintenance services). It had previously said it would be possible for it to remain as an independent organisation with as little as USD500m from outside investors if it sold of its non-core businesses.
"Our three companies will be able to provide continuity on Global Crossing's international networks and expanded service offerings," said ST Telemedia president and CEO Lee Theng Kiat.