Hutchison Telecommunications and Singapore Tech. Telemedia Agree to Acquire Global Crossing

MADISON, N.J., Aug. 9 /PRNewswire/ -- Global Crossing today announced that it has signed a definitive agreement under which Hutchison Telecommunications Limited (Hutchison), a wholly owned subsidiary of Hutchison Whampoa Limited, and Singapore Technologies Telemedia Pte. Ltd. (ST Telemedia) will invest a total of $250 million for a 61.5 percent majority interest in a newly constituted Global Crossing on its emergence from bankruptcy. Global Crossing's creditor groups support the agreement.

The agreement was approved today in a hearing before the Bankruptcy Court for the Southern District of New York.

Global Crossing is also preparing a Chapter 11 plan of reorganization. Global Crossing expects to file its plan in September and to emerge from bankruptcy in early 2003, subject to satisfying various contractual closing conditions, including regulatory approvals and confirmation of its plan of reorganization by the bankruptcy court.

The terms of the Hutchison and ST Telemedia agreement provide that Global Crossing's banks and creditors will receive 38.5 percent of the common equity in the newly constituted Global Crossing, $300 million in cash and $200 million of new debt in the form of senior notes. Existing common equity and preferred shareholders of Global Crossing will not participate in the new capital structure.

Under the agreement, Global Crossing will retain its UK national business, its conferencing division, and Global Marine -- three businesses which it had previously considered selling in order to maximize its cash position. Customers of these businesses, as well as Global Crossing's other customers, can expect service to continue without disruption.

The agreement with Hutchison and ST Telemedia follows several months of discussions with a large number of bidders. After reviewing and negotiating all the bids submitted, Global Crossing and its creditors entered into separate negotiations with Hutchison and ST Telemedia. These negotiations resulted in the agreement announced today. As a result of the agreement, Global Crossing has cancelled the auction scheduled for August 14, 2002.

"This is a textbook model for a successful strategic investment," said Mr. John Legere, CEO of Global Crossing. "Hutchison Telecommunications and Singapore Technologies Telemedia are highly respected telecom companies with assets and skills that complement Global Crossing's unmatched global network. With our turnaround well under way, and the support of strong new strategic partners, Global Crossing is poised to become the global leader providing networking services to enterprises and carrier customers in more than 200 of the world's top cities."

Mr. Canning Fok, Group Managing Director of Hutchison Whampoa, said, "We have confidence in the Global Crossing management team and look forward to working with them. Global Crossing presents an attractive business prospect for Hutchison and our investment in the company, which owns substantial broadband network capacity, is in line with our vision to be a leading global telecommunications player."

"Customers will be the real winners in this agreement," said Mr. Lee Theng Kiat, President and CEO of ST Telemedia. "Our three companies will be able to provide continuity on Global Crossing's international networks and expanded service offerings to benefit all our customers. As the telecom market stabilizes, there will be significant opportunities for the new Global Crossing, its creditors and employees. This investment will accelerate ST Telemedia's goal to become a significant global data and IP-centric communications group."

The Blackstone Group, L.P. and Weil, Gotshal & Manges LLP provided advice and counsel to Global Crossing regarding the agreement announced today.

Global Crossing provides telecommunications solutions over the world's first integrated global IP-based network, which reaches 27 countries and more than 200 major cities around the globe. Global Crossing serves many of the world's largest corporations, providing a full range of managed data and voice products and services. Global Crossing operates throughout the Americas and Europe, and provides services in Asia through its subsidiary, Asia Global Crossing.

On January 28, 2002, Global Crossing and certain of its affiliates (excluding Asia Global Crossing and its subsidiaries) commenced Chapter 11 cases in the United States Bankruptcy Court for the Southern District of New York and coordinated proceedings in the Supreme Court of Bermuda. On the same date, the Bermuda Court granted an order appointing joint provisional liquidators with the power to oversee the continuation and reorganization of the Bermuda-incorporated companies' businesses under the control of their boards of directors and under the supervision of the U.S. Bankruptcy Court and the Supreme Court of Bermuda. On April 23, 2002, Global Crossing commenced a Chapter 11 case in the United States Bankruptcy Court for the Southern District of New York for its affiliate, GT UK, Ltd. On August 4, 2002, Global Crossing commenced a Chapter 11 case in the United States Bankruptcy Court for the Southern District of New York for its affiliate, SAC Peru Ltd. Global Crossing does not expect that any plan of reorganization, if and when approved by the Bankruptcy Court, would include a capital structure in which existing common or preferred equity would retain any value.

expected to occur in early 2003 subject to obtaining regulatory approvals

Thanks for the head's up. This is not good. There are basically two ways this could be stopped by the feds (if they want to):

1. action by the FCC (see http://www.fcc.gov).

2. action by the Treasury Department, under "CFIUS" (Committee on Foreign Investment in the United States): http://www.treas.gov/offices/international-affairs/exon-florio/index.html

Committee on Foreign Investment in the United States (CFIUS) ------------------------------------------------------------------------

U.S. DEPARTMENT OF TREASURY

OFFICE OF THE ASSISTANT SECRETARY INTERNATIONAL AFFAIRS

OFFICE OF INTERNATIONAL INVESTMENT

EXON-FLORIO PROVISION

Introduction. The United States has traditionally welcomed Foreign Direct Investment (FDI) and provided foreign investors fair, equitable and nondiscriminatory treatment with few limited exceptions designed to protect national security. The Exon-Florio provision is implemented within the context of this open investment policy. The intent of Exon-Florio is not to discourage FDI generally, but to provide a mechanism to review and, if the President finds necessary, to restrict FDI that threatens the national security.

The Exon-Florio provision is implemented by the Committee on Foreign Investment in the United States ("CFIUS"), an inter-agency committee chaired by the Secretary of Treasury. CFIUS seeks to serve U.S. investment policy through thorough reviews that protect national security while maintaining the credibility of our open investment policy and preserving the confidence of foreign investors here and of U.S. investors abroad that they will not be subject to retaliatory discrimination.

The Statute. Section 5021 of the Omnibus Trade and Competitiveness Act of 1988 amended Section 721 of the Defense Production Act of 1950 to provide authority to the President to suspend or prohibit any foreign acquisition, merger or takeover of a U.S. corporation that is determined to threaten the national security of the United States. The President can exercise this authority under section 721 (also known as the "Exon-Florio provision") to block a foreign acquisition of a U.S. corporation only if he finds:

(1) there is credible evidence that the foreign entity exercising control might take action that threatens national security, and

(2) the provisions of law, other than the International Emergency Economic Powers Act do not provide adequate and appropriate authority to protect the national security.

To assist in making this determination, Exon-Florio provides for the President or his designee to receive written notice of an acquisition, merger or takeover of a U.S. corporation by a foreign entity. Once CFIUS has received a complete notification, it begins a thorough review of the notified transaction. In some cases, it is necessary to undertake an extended review or "investigation." An investigation, if necessary, must begin no later than 30 days after receipt of a notice. Any investigation is required to end within 45 days.

Information provided by companies contemplating a transaction subject to Exon-Florio is held confidential and is not made public, except in the case of an administrative or judicial action or proceeding. Nothing in section 721 shall be construed to prevent disclosure to either House of Congress or to any duly authorized committee or subcommittee of the Congress.

Factors To Be Considered. The Exon-Florio provision lists the following factors that the President or his designee may consider in determining the effects of a foreign acquisition on national security. These factors are:

(1) domestic production needed for projected national defense requirements;

(2) the capability and capacity of domestic industries to meet national defense requirements, including the availability of human resources, products, technology, materials, and other supplies and services;

(3) the control of domestic industries and commercial activity by foreign citizens as it affects the capability and capacity of the U.S. to meet the requirements of national security; (

4) the potential effects of the transaction on the sales of military goods, equipment, or technology to a country that supports terrorism or proliferates missile technology or chemical and biological weapons; and

(5) the potential effects of the transaction on U.S. technological leadership in areas affecting U.S. national security.

Amendments. Section 837(a) of the National Defense Authorization Act for Fiscal Year 1993, called the "Byrd Amendment," amended Section 721 of the Defense Production Act (the "Exon-Florio provision"). It requires an investigation in cases where:

o the acquirer is controlled by or acting on behalf of a foreign government; and

o the acquisition "could result in control of a person engaged in interstate commerce in the U.S. that could affect the national security of the U.S."

Legislative Cite. Section 721 of Pub. L. 100-418, 102 Stat. 1107, made permanent law by section 8 of Pub. L. 102-99, 105 Stat. 487 (50 U.S.C. App. 2170) and amended by section 837 of the National Defense Authorization Act for Fiscal Year 1993, Pub. L. 102-484, 106 Stat. 2315, 2463.

CFIUS

Executive Order. The Committee on Foreign Investment in the United States ("CFIUS") was originally established by Executive Order 11858 in 1975 mainly to monitor and evaluate the impact of foreign investment in the United States. In 1988, the President, pursuant to Executive Order 12661, delegated to CFIUS his responsibilities under Section 721. Specifically, E.O. 12661 designated CFIUS to receive notices of foreign acquisitions of U.S. companies, to determine whether a particular acquisition has national security issues sufficient to warrant an investigation and to undertake an investigation, if necessary, under the Exon-Florio provision. This order also provides for CFIUS to submit a report and recommendation to the President at the conclusion of an investigation.

In 1993, in response to a sense of Congress resolution, CFIUS membership was expanded by Executive Order 12860 to include the Director of the Office of Science and Technology Policy, the Assistant to the President for National Security Affairs and the Assistant to the President for Economic Policy. This order brought the membership of CFIUS to eleven under the chairmanship of the Secretary of Treasury. The other members are the Secretaries of State, Defense, and Commerce, the Attorney General, the Director of the Office of Management and Budget, the U.S. Trade Representative, and the Chairman of the Council of Economic Advisers.

Regulations. The Exon-Florio provision requested that the President issue implementing regulations. These regulations were issued in 1991. They set up a voluntary system of notification with the possibility of CFIUS member-agency notice for non-notified transactions. The President retains full authority to protect the national security with respect to any acquisition covered by this statute, regardless of whether the parties file a notification.

The Exon-Florio regulations do not define national security. The preamble to the regulations provides guidance that products, services and technologies important to U.S. defense requirements would be significant to national security. Even though notification is voluntary, CFIUS would consider notification of these transactions appropriate.

Code of Federal Regulations Citation. Office of International Investment, Department of Treasury -- Regulations pertaining to mergers, acquisitions, and takeovers by foreign persons, 31 CFR Part 800.

Procedures. Treasury, acting at the staff level through the Director of the Office of International Investment in the Office of the Assistant Secretary of International Affairs, acts as the secretariat for CFIUS. It receives and circulates notices to CFIUS agencies and coordinates reviews. Reviews are conducted on a case-by-case basis.

The Exon-Florio statute established a 30-day review following receipt of a notification. For those transactions for which an extended 45-day review (or "investigation") is completed, a report must be provided to the President, who must by law announce the final decision within 15 days. In total, the process can not exceed 90 days. The statute requires the President to inform Congress of his determination of whether or not to take action under section 721.

The parties to an acquisition subject to section 721 may submit a voluntary notice to CFIUS of the proposed or completed acquisition by sending 13 copies of the information requested in part 800.402 of the Exon-Florio regulations to:

Ms. Gay Hartwell Sills Staff Chair Committee on Foreign Investment in the United States ("CFIUS") Office of International Investment Department of Treasury 1500 Pennsylvania Avenue, N.W., Room 4201 NY Washington, DC 20220

Phone: (202) 622-9066

Also: (202) 622-1860 E-Mail: gay.sills@do.treas.gov

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Press Release

Hutchison Telecommunications and Singapore Technologies Telemedia Sign Agreement to Acquire a Majority Interest in Global Crossing

- Global Crossing's creditor groups support investment agreement - Agreement approved by bankruptcy court on August 9 - Investment will fund successful emergence of Global Crossing from Chapter 11, expected to occur in early 2003 subject to obtaining regulatory approvals