Global Crossing bankruptcy plan approved
SEC probe won't affect re-org
Telecoms company Global Crossing Ltd. received a US judge's approval for its plan to emerge from a Chapter 11 bankruptcy reorganisation.
The approval by Judge Robert Gerber will clear the way for the firm to emerge from bankruptcy in less than a year. The plan that the judge approved, which was revealed in court papers on Tuesday, is based mainly on the sale of about 61.5 per cent of Global Crossing to Hutchison Whampoa and Singapore Technologies Telemedia Pte for the tidy sum of $250m. Global Crossing stock is also set to be divvied up to creditors as part of the now approved arrangement.
During the height of the dot-com and telecoms boom, Global Crossing had a market value approaching $39bn.
US regulators will still need to approve the proposed scheme, although it has been revealed that Kissinger McLarty Associates, a lobbying firm, has been retained by Global Crossing to help it to win the necessary endorsement from the US government.
However, other investigations are on-going at the Securities and Exchange Commission and US Justice Department, including enquiries into whether the fibre-optic company camouflaged its bad financial performance in previous years with paper-only capacity swap agreements with rivals. Global Crossing has said that these inquests won't affect its ability to reorganise.
The company, which has operations in 27 countries and owns a 100,000-mile fibre-optic network, is important to Ireland's ambitions to become an e-hub. In the last four years the Irish government has signed two major deals with Global Crossing for high-speed communications links to cities around the world. Its most recent agreement, signed in May of 2001, was expected to see the company establish high speed Internet links with 40 key European and US cities. In total, the government was to pay as much as EUR77m to help construct the new links with up to EUR25m paid this year.
The sale of the firm to the Asian telecoms, which was detailed during the summer of 2002, values Global Crossing at about $407m. When Bermuda-based Global Crossing went into bankruptcy protection in January, the fourth largest bankruptcy declaration in US history, it said it had about $12.4bn in debts with about $22.4bn in assets.
In the now-approved bankruptcy plan, the company's creditors will divide around $300m in cash and $200m in notes, with the final 38.5 per cent of Global Crossing's shares divvied up among creditors. Bank lenders will get the $300m in cash, and about $175m of the notes. They will also take a 6 per cent stake in the company.
Bondholders, which are owed about $4.54bn, along with other unsecured creditors, will divide 32.5 per cent of the reorganised company's shares and $25m of notes.
Shareholders, who have seen Global Crossing stock climb from $64 a share in 1999 to its current price of $0.02, will get nothing under the plan. John Legere will remain Global Crossing's chief executive officer. Other restructuring moves over the past year have included dramatic cuts in operating costs and about 10,000 job cuts, leaving the firm with around 5,350 workers.