Global Crossing wants to keep $700M

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Posted 7:54AM on Thursday, February 7, 2002

LOS ANGELES - Global Crossing Ltd. has asked a bankruptcy judge to approve a restructuring process that would forgive all the telecommunication firm's $12.4 billion of debt and leave $700 million in the company coffers for the new owners. The principal buyers, two Asian conglomerates, have offered to invest $750 million for a 79 percent stake in the world's most far-reaching fiber optic network. The buyout proposal, the details of which were outlined this week in a filing with the U.S. Bankruptcy Court for the Southern District of New York, is drawing questions for both its size and its choice of partners. Global Crossing, which on Jan. 28 became the largest telecom company in U.S. history to seek Chapter 11 bankruptcy protection, has agreed to a buyout by Hong Kong's Hutchison Whampoa Ltd. and Singapore Technologies Telemedia Ltd. Beverly Hills headquarters AP/ [27K] -------------------------------------------------------------------------------- Under terms of the current agreement, Hutchison and STT would each invest $375 million in cash in the Bermuda-based company. Creditors would receive the remaining 21 percent equity of the firm, $300 million in cash and $800 million in notes in exchange for forgiving the company's debt. Shareholders would receive nothing. As part of the terms of the agreement, Global Crossing has agreed to have at least $1 billion of working capital on hand (cash plus receivables minus payables) including a minimum of $700 million in cash as of Sept. 30, 2002. The company says it has more than $600 million in cash today. Some investors, however, have expressed concern that the company is filing for bankruptcy protection with too much cash on hand. ``Having that kind of cash on hand is very unusual for a company seeking Chapter 11,'' agreed John Hansen, a bankruptcy lawyer, with Nossaman, Guthner Knox Elliot LLP in San Francisco. But in Global Crossing's case, the cash may be necessary to support the company until demand for its fiber capacity increases, he said. Nevertheless, the huge sum raises some questions, he added. ``If I were a creditor, I would be a little concerned. I would wonder if they are paying fair value.'' Rebecca Yeamans, a company spokeswoman, declined to comment on why the company was holding on to so much cash while seeking bankruptcy protection. ``We are letting the filing stand for itself,'' she said. Meanwhile, at least one federal lawmaker wants to prevent the buyout going ahead for national security reasons. Rep. Dana Rohrabacher, a California Republican, has sent letters to President Bush, the attorney general, the Department of Defense and the investigative arm of Congress demanding an inquiry into the plan next week, said Al Santoli, national security adviser to Rohrabacher. At issue is the role of billionaire Li Ka-shing, Hong Kong's most well-known businessman, whose companies make up 15 percent of the market capitalization of the Hong Kong stock market. Ka-shing's empire includes ports, telecom and energy assets around the world. Rohrabacher claims Ka-shing's close connections to the Chinese government should disqualify him from owning Global Crossing's network, which by one estimate controls 20 percent of all the fiber optic cable leaving the United States. Yeamans declined to comment on Rohrabacher's position or the likely impact of any inquiry. Although Global Crossing has agreed to the buyout with Hutchison and SST, the firm said in court papers that it has also retained New York's Blackstone Group to seek other bids. Any new offer would have to exceed the current one by at least $50 million to cover a $40 million termination fee, the filing said.