By Richard Brown
A bankruptcy court has permitted fibre-optic firm Global Crossing to be sold for $250 million to two firms that previously tried to buy the company for three times the figure. At the height of the telecommunications boom, the company boasted a market capitalisation of $48 billion.
A bankruptcy court has permitted fibre-optic firm Global Crossing to be sold for $250 million to two firms that previously tried to buy the company for three times the figure. At the height of the telecommunications boom, the company boasted a market capitalisation of $48 billion. Hutchison Telecommunications and Singapore Technologies Telemedia agreed to invest $250 million in cash, while Global Crossing will pay $300 million in cash and issue $200 million in notes. Hutchison Telecommunications is an operating unit of Hutchison Whampoa and Singapore Technologies Telemedia is a unit of Singapore Technologies.Founded in 1997, Bermuda-based Global Crossing constructed an undersea phone network that connected 27 countries and 200 cities. Saddled with too much debt, Global Crossing filed for bankruptcy protection in January.After bankruptcy proceedings have concluded, the new investors will control 61.5 percent of Global Crossing, 32.5 percent will be owned by unsecured creditors and the remaining 6 percent destined for lenders. Global Crossing stock owners will receive nothing. An earlier deal giving the investors a 79 percent stake was rejected. The sale will come as a blow to Global Crossing founder Gary Winnick who was trying to coax investors to support a management plan to restructure the company.The former junk bond salesman approached private-equity firms and other potential investors in a bid to raise over $1 billion to rescue the firm from Chapter 11 bankruptcy-court protection, the fourth-largest filing in U.S. history. Winnick reportedly told investors he was willing to contribute as much as $100 million of his own money under the right circumstances. To the ire of many investors, Winnick sold $735 million of Global Crossing shares from his personal holdings. The firm is under SEC scrutiny for possible securities-law violations.The rescue plan had called for the sale of several Global Crossing assets, including its conferencing operations, its UK fibre-optic network and its Global Marine cable-laying division, worth upto $1 billion. The ambition was then to recapitalise Global Crossing with an additional $500 million from investors. Global Crossing did not have any termination points for its fibre optic network in the Middle East. Most regional telcos connect via FLAG Telecom junctions or through SEA-MEWE 1, 2 and 3 terminals. FLAG Telecom is itself currently subject to Chapter 11 bankruptcy protection in the US.