Posted on 01/29/2002 6:10:42 AM PST by BallandPowder
Global Crossing Ltd. (news/quote), which spent five years and $15 billion to build a worldwide network of high-speed Internet and telephone lines, filed for bankruptcy protection yesterday, unable to find enough customers to make its network profitable.
The company had attracted many notable business and political figures as investors, including Terry McAuliffe, chairman of the Democratic National Committee, who profited by selling Global Crossing stock before it declined.
Another early investor was former President George Bush, who accepted stock in lieu of an $80,000 fee for speaking to Global Crossing customers in Tokyo in 1999, although it is not known whether Mr. Bush sold his stock. Other investors included the Tisch family of New York and Lodwrick Cook, the retired chairman of ARCO and a big Republican Party fund-raiser.
If the bankruptcy plan is accepted, Global Crossing's chairman, Gary Winnick, will lose control of the company. But the blow has been softened for Mr. Winnick by Global Crossing stock deals that have reaped him more than $730 million. Mr. Winnick, a former associate of Michael R. Milken, founded the company in Beverly Hills, Calif., in 1997.
Others have not fared as well. Global Crossing shares have fallen more than 99 percent, to 13.5 cents, in over-the-counter trading yesterday after being delisted by the New York Stock Exchange; as recently as March 2000, they traded for more than $60. Since that high point, more than $40 billion of the company's market value has evaporated.
"I don't know how the management of this company did so well while small shareholders did so poorly," said Linda Lorch, a primary- school teacher in Scarsdale, N.Y., who said she lost more than $120,000 on Global Crossing stock.
Global Crossing has never reported an annual profit since it was created in an ambitious plan to extend its sole resource — a fiber optic cable traversing the Atlantic Ocean — into a 100,000-mile network connecting 27 countries in the Americas, Europe and Asia. The company has $22.4 billion in assets and $12.4 billion in debt, making its filing the largest bankruptcy by a telecommunications company. It is almost half the size of Enron (news/quote), the largest bankruptcy filing of any kind in United States.
Like Enron, Global Crossing staked its future on hopes of bullish demand for high-speed, or broadband, data transmission. Whereas Enron sought and failed to create a market for trading broadband capacity, Global Crossing tried and failed to make a profit from selling capacity directly to telephone and Internet service providers and large companies. In its operations, Global Crossing lost an estimated $7 billion in the last five years.
"Sometimes it takes the markets time to catch up to visionary ideas," said Mike Sitrick, a spokesman for Mr. Winnick. He added that Mr. Winnick was "confident that the markets will eventually recognize the value of the business."
Based for tax reasons in Bermuda but managed from luxurious offices in Beverly Hills, Global Crossing grew through a combination of high- priced acquisitions and the rapid construction of undersea and transcontinental cables. By the time it announced plans late last year to cut 3,200 jobs and lower capital spending to $1.25 billion from $4 billion, investors had lost faith in Mr. Winnick's strategy.
"This was a foregone conclusion," said Anthony Klarman, a debt analyst at Deutsche Bank (news/quote). "They never had enough customers."
Two Asian companies, Hutchison Whampoa Ltd. (news/quote) of Hong Kong and Singapore Technologies Telemedia Ltd., said they would together pay $750 million for a controlling stake in Global Crossing as part of the filing. The investment, however, depends on Global Crossing's ability to persuade its lenders and bondholders to approve the bankruptcy plan. John Legere, the chief executive of Global Crossing, said in an interview yesterday that management would consider competing bids for control of the company.
"We could not ignore an alternative proposal," Mr. Legere said.
An agreement with lenders on the bankruptcy plan appeared less than certain yesterday, prompting concern that Global Crossing might be headed for a messy collapse instead of a smooth restructuring.
Speculators had assumed last week that Global Crossing would default on its debts, causing bank loans to trade at 30 cents on the dollar and bonds at about 7 percent of face value. After the filing yesterday, prices on bank loans climbed to about 43 cents and bonds to 10 cents.
To avoid liquidation, a common fate in recent telecommunications bankruptcies in which assets are auctioned to the highest bidder, Global Crossing needs to persuade about 20 senior lenders — including Wall Street firms like J. P. Morgan Chase (news/quote), Merrill Lynch (news/quote) and Citigroup (news/quote) — to take part in the reorganization of the company.
Global Crossing also needs to lure bondholders into the deal, but it is not clear what terms it will offer them. Hutchison Whampoa and Singapore Technologies would acquire stakes of about 30 percent each with their investment, valuing Global Crossing at about $1.25 billion, people close to the company said yesterday.
With bankruptcy eliminating equity investors from the picture, that leaves about 40 percent of Global Crossing's equity to be divided among debtholders, who also expect to get some cash in redemption for their losses. Global Crossing's banks showed leniency to the company this month by agreeing to waive loan violations that would put it in default, but it is not clear whether this approach will be extended to the companies intent on acquiring Global Crossing.
The company's failure to reach a deal with debtholders before filing for bankruptcy has increased concern that its bankruptcy filing could be protracted. A borrowing policy that secured bank financing not with real assets but with shares of Global Crossing subsidiaries that are now almost worthless has added to worries at banks.
"This looks like a very contentious process," said Igor Volshteyn, an analyst with the Tejas Securities Group in Austin, Tex.
An acquisition by Hutchison Whampoa, a conglomerate controlled by Li Ka-shing, the richest man in Hong Kong, had been rumored since last month. But the participation of Singapore Technologies, a telecommunications and Internet concern whose partners include Nippon Telegraph and Telephone (news/quote) and the BT Group, came as a surprise.
An implicit part of the deal announced yesterday would transfer control of Asia Global Crossing (news/quote), an independent unit that operates a fiber optic network in Asia, to Hutchison and Singapore Technologies. Global Crossing's network assets in Asia, Latin America and Europe are considered more valuable than its system in North America, which is duplicated by several rivals.
One potential problem with a takeover by foreign entities is resistance from regulators because the company counts among its customers several government institutions, like the Navy. Other customers include American Express (news/quote) and Microsoft (news/quote) and large carriers like Deutsche Telekom (news/quote).
Global Crossing's bankruptcy is expected to reverberate within the telecommunications industry, with large companies like SBC Communications (news/quote), Verizon Communications (news/quote) and Cisco Systems (news/quote) listed among large creditors. In asset terms, Global Crossing's bankruptcy filing is larger than the total of the four largest telecommunications bankruptcies of last year — those of 360Networks, Winstar Communications, PSINet (news/quote) and Exodus Communications (news/quote).
Global Crossing is seeking to secure more than $300 million of debtor-in-possession financing from J. P. Morgan Chase so it can continue operating in a relatively normal fashion, people close to the company said. Global Crossing still has about $600 million in cash, about half of what it expects to spend this year.
More good information on this fiasco!!!
Nice balance in reporting by the Clymers....
Oh yeah. He's the guy that heads up the Party that represents the common citizen, the little guy, the average Joe.
The kind of people that can invest $100,000 and get a return of $18 Million.
Just like me and you.
Now where did I hear Hutchison Whampoa before? Could it have been in 1996, bankrolling Klintoon's purchase of 4 more years in the Oval Orifice? If I had to depend on the New York Slimes for my news, I wouldn't know.
If you depended on these pressholes, you would be over at DU. As for Hutchison Whampoa, yes, methinks it has a bigger play than is currently known....
Oh, yes...Global Crossing Brings Big Prize To Hutchison Whampoa
Global Crossing Files for Bankruptcy in One of Largest Corporate Failures
Source:AP; Published: 1/29/02;
Jim KraneTerry McAuliffe is Money in the Bank
Source: Worth Magazine; Published: 01/28/02;
Author Richard Blow
Taxes on what, not profits?
Let's see, we have X42imp turning over our military secrets to the Chicoms and now we have X42imp's main man making a fortune as this hugely strategic infrastructure will probably fall into ... Chicom hands. Anybody see a pattern here?
I hear a lot about naughty Terry McA doing the Enron thingie with Global Crossing, but I ain't hearing much about the national security issue. It reminds me of when the Clintons were first in office and they immediately began dismantling the security system in the White House. Even the good FBI man who alerted us to the danger to nat'l sec from that was naive enough to think that it was just because the goons were protecting their little druggie staffers. IOW just incompetents screwing up. IMO that was a PLAN and so is this. And the Chicoms are NOT implementing it on their own. IMO.
One potential problem with a takeover by foreign entities is resistance from regulators because the company counts among its customers several government institutions, like the Navy. Other customers include American Express (news/quote) and Microsoft (news/quote) and large carriers like Deutsche Telekom (news/quote).
Aside from which political party is MORE culpable (really getting old..they're both crooks..face it), think of the ramifications of the transfer of this technolgy...to the chi-com no less. A GLOBAL FIBER OPTIC NETWORK!
The ramifications are endless, but in summary entails..TADA! COMPLETE CONTROL OF GLOBAL INFORMATION! To reiterate, "..the company counts among its customers several government institutions, like the Navy. Other customers include American Express (news/quote) and Microsoft (news/quote) and large carriers like Deutsche Telekom."
Regardless of the failings of this company to generate revenues, THIS IS AN EXTREMELY VIABLE TECHNOLOGY! Whomever controls this network controls the people. Police and militaries from around the world (including/especially our own) would love to have this global portal at the tips of their fingers. With the technologies which exist today and are being widely propagated around our country, I garuantee that sensors and camera's everywhere will be uploaded to these fiber optic networks creating a police state only previously dreamed of.
Don't be suprised when this bankrupcy/bailout disappears from all U.S. headlines. The last thing our politicians and media seems to want us to know is how every aspect of our lives will soon be watched, monitored, fined, and possibly apprehended by a global power, and it won't be by the US government. This global info system, and those like it, will be the backbone of our Brave New World. But no matter. The elite do need to recoop their investment, even if it means selling out our privacy, our national soveriegnty, and our way of life. Freedom no more. Think about it.
Didn't William Daley recently become president of SBC?
If the Slimes were interested in accuracy in reporting instead of promoting a Hitlery candidacy in 2004/2008, the scorecard would be 2 RATs, 1 Pubbie, 1 opportunistic bastich with VERY close ties to the Clinton machine.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.