Global Crossing seeks restructuring

In late May Hutchison Whampoa and Singapore Technologies Telemedia ended four months of talks to buy Bermuda-based Global Crossing Ltd. A joint bid of USD750m for 79% of its assets (provided that creditors write off USD12.4bn debt) was rejected by creditors, which include AT&T, Lucent and Verizon, who say the assets are worth USD22.4bn.

In January Global Crossing filed for Chapter 11 protection, then the fourth-largest bankruptcy in US history (even without 59%-owned subsidiary Asia Global Crossing Ltd, which is seeking separate bidders for its network). Chairman Gary Winnick founded Global Crossing in 1997 and built an undersea network linking 27 countries and 200 cities to a market value of USD48bn.

No other bidders have emerged for the whole network, but Global Crossing said it would keep talking with Hutchison/ST Telemedia and other potential investors as it proceeded to an auction on 8 July.

Meanwhile, hoping to avoid liquidation and break-up of the network and to give some flexibility, Winnick is seeking USD1bn for a management-led restructuring plan. Repaying creditors calls for the sale of assets, including its conferencing operations, UK network and Global Marine cable-laying unit (bought for USD2.5bn in 1999 and expected to raise USD0.5-1bn). After meeting target Q1/2002 sales of USD768m (excluding Asia Global Crossing and Global Marine), it hopes to raise a further USD500m with other investors to recapitalise.

Cost reductions include:

  • Cutting staffing from over 13,500 at the beginning of 2001 to 5,000;
  • Closing 217 offices by year-end (to save USD121m annually).

Capex should fall from USD3.2bn in 2001 to USD200m in 2002 and opex from USD1,550m to USD900m.

But the US Securities and Exchange Commission is investigating insider stock sales of more than USD1.3bn between 1999 and the end of November 2001, including USD123.5m in May 2001 out of the USD735m sold by Winnick, two weeks after a Q1/2002 net loss of USD675m (up from USD348m a year ago). A former employee alleges that Global Crossing delayed lowering its financial outlook because of the pending stock sale.

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