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Global Crossing, Hutchison Back Together
the street.com ^ | 8/9/02 | Rebecca Byrne

Posted on 08/13/2002 8:00:11 AM PDT by LarryLied

Global Crossing agreed to be acquired Friday by Asian companies Hutchison Whampoa and Singapore Technologies Telemedia in a bid to emerge from bankruptcy by early 2003.

The plan, which was approved by the Bankruptcy Court for the Southern District of New York, calls for Global Crossing creditors to receive $300 million in cash, $200 million in senior notes and 38.5% of the reorganized company. Hutchison Whampoa and Singapore Telemedia will invest a total of $250 million for a 61.5% majority interest in the new firm.

The offer is two-thirds less than the $750 million that the investors had proposed in February for a 79% stake. That's hardly surprising given the glut of cheap telecom assets now on the market in the wake of WorldCom's collapse.

"This is a textbook model for a successful strategic investment," said John Legere, CEO of Global Crossing.

Legere said customers would continue to receive service on its international networks. Shareholders will receive nothing from the deal.

The relationship between Hutchison and Global Crossing isn't a new one. The two already had a 50-50 joint venture, and Hutchison owned $400 million in Global's convertible preferred stock.

Meanwhile, the chairman of the Hong Kong conglomerate, Li Ka-shing, is one of the largest individual shareholders of CIBC, which invested $41 million in Global Crossing for a 25% stake when it was first starting out. CIBC also has a banking relationship with Hutchison and has formed joint ventures with the Li family in the past.

Like Global Crossing's founder and chairman Gary Winnick, CIBC has been criticized in the past for reaping huge gains on Global's stock and cashing out while ordinary investors saw their shares sink to practically nothing.

CIBC and Global had been cozy for a long time. Five CIBC employees had served on Global's board between 1998 and 2000, three of whom had formerly worked with Winnick at Drexel Burnham Lambert in the 1980s. The employees dumped their shares in Global before they started to tank.

For some, though, it's not Li's ties to CIBC that are disconcerting; it's his ties to the Chinese government. Back when Hutchison made its first offer in February, Rep. Dana Rohrabacher (R., Calif.) sent a letter to Secretary of State Donald Rumsfeld objecting to the deal because of Li's close link to Chinese President Jiang Zemin.

Because Global Crossing's clients include the U.S. military, the Department of Defense and other government agencies, Rohrabacher said the sale would be a "national security nightmare."

Global said it expects to file a reorganization plan in September and hopes to emerge from bankruptcy in early 2003, subject to contractual closing conditions, regulatory approvals and confirmation of its reorganization by the bankruptcy court. If the deal falls though, Global must pay a $30 million break-up fee to Hutchison.

Global Crossing, which filed for bankruptcy in January this year after amassing $12.4 billion in debt, is under investigation by the Securities and Exchange Commission and the U.S. Justice Department for its accounting practices.

Many shareholders who have filed lawsuits against the company claim that while they knew the risks of investing in telecommunications, they were not aware that Global was boosting sales by swapping capacity with its customers. Founder Gary Winnick reaped hundreds of millions of dollars by selling the firm's stock shortly before going bankrupt.



The Drexel Connection at Global Crossing (How the firm's alumni helped launch the telecom startup ):

Gary Winnick, Global Crossing's founder and chairman, ran Drexel's convertible bond desk in the early 1980s and sat just a few feet from junk-bond king Michael R. Milken. Less well-known are four of Winnick's Drexel colleagues, now at Toronto-based Canadian Imperial Bank of Commerce (CIBC), which provided a healthy chunk of Global Crossing's initial capital. Because of its investment, CIBC, one of Canada's five largest banks, has realized more than $1.3 billion in profits from Global.

Dean C. Kehler, Andrew R. Heyer, and Jay R. Bloom, who ran CIBC's high-yield bond department, had all worked under Drexel dealmaker Leon D. Black. Kehler and Bloom helped finance many of the high-profile buyouts of the 1980s, including RJR Nabisco. Heyer bankrolled takeover artists like Saul P. Steinberg. Under the direction of this group, CIBC in March, 1997, ponied up $41 million for a 25% stake in Global Crossing. Fifteen months later when Global Crossing sold stock to the public, that stake was worth $926 million. CIBC served as an underwriter for the initial offering, earning $20 million in fees for that and other Global Crossing work, according to Thomson Financial. CIBC also received $12 million in stock from a consulting contract with Global.. .

Even as other shareholders have watched the stock sink to pennies a share, CIBC continues to coin money--$200 million in profits in the past three months, thanks to shrewd financial maneuvering. "This isn't about hedging, it's about insider trading.... Over a period of five years [they were] impeccable in their timing," says Jay Province, who owns 35,000 shares and founded a Web site for Global Crossing investors. . .



www.intellnet.org

:

Li Ka-shing, owns ten percent of Canadian Imperial Bank of Commerce (CIBC), making him the single largest individual shareholder. CIBC, in turn, owns Merrill Lynch Canada . Merrill Lynch International is owned jointly by Thomas Fung and Li.

On several occasions, Li has been called a "spy" and an "intelligence-collection front for China." He has also been implicated in US presidential campaign finance scandals. He is closely associated with General Ji Shengde, a former military intelligence director of the PLA (recently arrested for corruption) and is also close to General Xiong Guankai (also PLA) and Jiang Zemin. Li has also participated in several real estate deals with Chen Xitong, famous for his involvement in Tiananmen Square.



Master of Disaster - How L.A.'s super-rich Gary Winnick is trying to wash blood from the Global Crossing implosion off his hands -- and make more money in the bargain.

Meantime, stories about pals from Winnick's inner circle who made a killing on Global Crossing inconveniently continue to dribble out.

Business Week has reported that Canadian Imperial Bank of Commerce made more than $1.3 billion in profits from Global Crossing, thanks to shrewd moves by four of Winnick's former Drexel colleagues working at the bank's L.A. office. Some of those former colleagues sat on the Global Crossing board at various times.

The most shocking aspect of the huge profit made by the four men at Canadian Imperial Bank of Commerce is that they earned $200 million of the total after Global Crossing stock had plummeted to a few cents.

As it turns out, Winnick's former Drexel colleagues at the bank had taken a huge "hedge" position --essentially, they risked tens of millions of dollars to bet that the stock was going to nosedive when nobody else believed it would. When the bankers were proved right, they made a fortune.

"It's terrible what they have done," says shareholder Province. "I see Winnick and his friends as a small group of people whose ultimate goal was to cut out the little shareholders. After Winnick's friends made billions when the stock went up so crazily, I believe Global Crossing realized the telecom crash had arrived and looked for a way to benefit. Somebody said, "We can go bankrupt, and our friends will make hundreds of millions more off hedges, and then we call sell the company -- but we'll sell it to some friends at a bargain-basement price, and we'll all come out rich as kings.'"



Business Week
CIBC, Global Crossing, and Drexel

MARCH, 1997
Gary Winnick, a former Drexel exec, and CIBC are brought together by Bruce Raben, a dealmaker for the bank in L.A. who also worked for Drexel. CIBC pays $41 million for a 25% stake in Global.

AUGUST, 1998
Global sells stock to the public, valuing CIBC's stake at $926 million. Of the 19-member board, 3 out of 5 CIBC seats are filled by Drexel alums.

JUNE, 2000
All CIBC directors have resigned.

OCTOBER, 2000
CIBC hedges on Global; locks in gains of about $800 million.

FEBRUARY, 2002
To date, CIBC has sold $1.3 billion worth of Global shares. It has locked in profits on an additional $300 million, yet to be realized. Write-offs on loans and preferred shares may hit $242 million, however.



BusinessWeek
MARCH 11, 2002

A spokesman says CIBC had no knowledge that Global's business was souring. He adds that the bank always regards such investments as short-term.


TOPICS: Business/Economy; Crime/Corruption; Foreign Affairs; News/Current Events
KEYWORDS: globalcrossing; winnick

1 posted on 08/13/2002 8:00:11 AM PDT by LarryLied
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To: LarryLied
So...does this mean Husky Oil will come up for sale ?
2 posted on 08/13/2002 8:55:44 AM PDT by Eric in the Ozarks
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To: LarryLied
Clintonism continues unabated, unfettered. We'd better start facing down these ChiComs.
3 posted on 08/13/2002 8:58:24 AM PDT by onedoug
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To: PhiKapMom; Fracas; Rodney King; Amelia; Howlin; E Rocc; hchutch; Dakmar; shigure; spetznaz; ...
Did Dean C. Kehler, Andrew R. Heyer, Bruce Raben or Jay R. Bloom tell McAuliffe they were hedging GX and for him to sell?

Global Crossing — A Canadian Bank’s Adventures in Wonderland
by William Krehm

CIBC had served as co-lead underwriter of Global Crossing’s Initial Public Offering (IPO) and had been allotted 1.3 million shares to sell to its clients. If word got out that the bank was selling or planning to sell its 25% stake in the company, the price would have plunged, damaging the holdings of it its clients and thousands of investors.” So after wrestling with its corporate conscience, it had its executives one by one resign from the GC board to clear the way for the sale of its shares.

“But the most controversial move was yet to come. In one of the largest equity hedges ever negotiated in Canada, it locked in its profit on 47 million GC shares at future dates ending in 2003 at fixed prices between $20 and $64 (US) a share.” Such is the miracle of derivatives! You can sell your interest unknown to the world. With banks sitting on a variety of moral chairs at the same time, this is one reason why they love their derivatives so dearly.


4 posted on 08/13/2002 9:48:54 AM PDT by LarryLied
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To: LarryLied
Thanks for the great info! Much appreciated!
5 posted on 08/13/2002 10:16:19 AM PDT by PhiKapMom
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To: LarryLied
Thanks for the ping! Good stuff. China and Canada are closerthanthis...

"Figures provided by the General Administration of Customs indicate that trade volume between China and Canada has risen annually: the bilateral trade volume hit US$4.37 billion in 1998, 29 times 1970's figure and trade in 1998 grew 11.6 per cent from 1997."

"While China's exports to Canada reached US$2.13 billion last year, up 11.7 per cent, imports from Canada were US$2.24 billion, up 11.5 per cent. Canada is now China's 10th largest trade partner."

6 posted on 08/13/2002 10:17:25 AM PDT by Fracas
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To: pittsburgh gop guy; Saundra Duffy; MoodyBlu; holyscroller; kwyjibo; RayChuang88; Tickle Me Pank; ...
Democratic Party Ethicist-Terry McAuliffe seems to have forgotten his $18 million windfall.
The Wall Street Jounral ^ | Monday, August 12, 2002 | WSJ Editorial Board Posted on 08/12/2002 1:21 AM Eastern by pittsburgh gop guy
7 posted on 08/13/2002 8:53:10 PM PDT by LarryLied
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To: Liz; Mudboy Slim; BigWaveBetty; willy WOXOF; Aaron_A; nov7freedomday; KC_Conspirator; wiseone; ...
*ping*
8 posted on 08/16/2002 1:13:35 AM PDT by LarryLied
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To: LarryLied
Don't blame Global Crossing. Go blame the GeoBush administration for not blocking this sale to this ChiCom front company. This is Clintonism all over again where Hutchison Whampoa was allowed to buy ports on each side of the Panama Canal.
9 posted on 08/16/2002 1:18:14 AM PDT by dennisw
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To: LarryLied
    Hutchison Whampoa Snags Global Crossing
    NewsMax ^ | 8/10/02 | Limbacher

    Posted on 08/10/2002 7:18 AM Pacific


    Hutchison Whampoa, the mammoth company that runs the Panama Canal and has close ties to the Chinese army, has a new rhinestone in its crown: Global Crossing.

    Along with another Asian company, Singapore Technologies, it paid $250 million today for the bankrupt fiber-optic network company - a third of the original offer.

    "An outside financial adviser to Global Crossing who was called to testify at a hastily scheduled hearing early Friday said only three credible bids had been received during a lengthy auction process and that bidders were spooked by the ongoing collapse of the business," the Associated Press reported.

    "It's a very difficult world today in the telecommunications industry," said Arthur Newman, the senior managing director in charge of the restructuring for Blackstone Group.

    The Asian companies agreed to invest $250 million in Global Crossing's business, and to pay $300 million in cash and issue $200 million in notes to its creditors. "The investors will hold a controlling 61.5 percent stake in the new Global Crossing that emerges from bankruptcy, possibly early next year," AP said.

    Global Crossing is the fourth-largest bankruptcy in U.S. history.

    Observations:

    A Chinese company with ties to the red army snaps up the company known for its fishy ties with Democrat national chairman Terry McAuliffe, Bill Clinton's boy.

    Clinton was notorious for the payments he received from the Chinese.

    Thanks to an insane giveway by another Democrat president, Jimmy Carter, Hutchison Whampoa controls the Panama Canal.

    Why has Hutchison Whampoa's purchase of Global Crossing received almost no media attention?

The observations are good.

10 posted on 08/16/2002 5:53:45 AM PDT by Tumbleweed_Connection
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To: LarryLied
I am glad thestreet.com has emphasized the many shady portions of this saga.
11 posted on 08/16/2002 5:19:19 PM PDT by Aaron_A
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To: Aaron_A
Interesting that other media outlets totally ignore the connections. The Economist ran a puff piece on Li Ka-shing, this week. No mention of how his men were Winnick associates and how CIBC manipulated Global.
12 posted on 08/16/2002 8:09:46 PM PDT by LarryLied
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To: LarryLied
Nice work. I don't want to bash Bush, but can you imagine how up in arms conservatives would be if Clinon allowed this.
13 posted on 08/16/2002 8:16:42 PM PDT by MattinNJ
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To: MattinNJ
Bush allowed Winnick to do exactly what?
14 posted on 08/16/2002 8:25:14 PM PDT by LarryLied
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To: LarryLied
Anne Bingaman, late of Reno Justice antitrust crucifixion of Bill Gates, was paid two million in 1999 for six months lobbying FCC on behalf of Global Crossings.

Anne Bingaman's husband is Senator Jeff Bingaman, junior senator of New Mexico, whose Bingaman Commission to Beijing and other Asian capitals seated Charlie Yah Lin Trie. This was as a favor to Clinton and a reward to Trie for channeling bags of cash and sequentially numbered money orders to Clinton, the DNC, the Presidential Legal Expense Trust.

Trie will be remembered as the author of the "Dear President" letter to Clinton during the 1996 Taiwan Strait crisis--obviously parroting the voice of his ChiCom puppetmaster.

Terry McAuliffe took his 100K in Global Crossing and made it into an eighteen million dollar windfall, selling before the company nosedived.

The Hutchison Whampoa award of ports Balboa and Cristobal over Bechtel was obviously rigged. Clinton sent Carville to install the right dirty Panamanian pols. Our recalcitrant Ambassador was recalled. And shazaam, "I'm sure the Chinese will do a good job of managing the Canal."

pssst, traitor-rapist42, you said Chinese--don't you mean. . .oh, never mind

It is not clear what leverage Bush has had to block the current arrangement--which is the continuation of decades of persistent intent.

Will this actually put ChiCom intel into headsets monitoring U.S. economic and military communications?

As for PLA Gen. Xiong Guangkai--traitor-rapist42 had him as honored guest of the White House January 24-26, 2000, to "reestablish military-to-military ties".

Uh-oh.

15 posted on 08/16/2002 8:41:53 PM PDT by PhilDragoo
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To: PhilDragoo
Wow...
16 posted on 08/16/2002 10:17:29 PM PDT by LarryLied
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To: LarryLied
I believe there are laws in place that would prevent the acquisition of a stategic assetsuch as this by a potentially hostile government. Again, I am not a Bush basher. I am a tremendous admirer of his patriotism, character and his leadership. I love the team he has in place (Cheney, Rice and Rummy). It just seems to me that a strong message could have been sent that the FCC under Powell Jr. will prevent this. I have yet to see it. Admittedly, it's still early.

The Chicoms just make me nervous. I am sure I don't have to tell you about the tremendous strides they made under that treasonous bastard (Panama Canal, nuclear secrets, high speed computers, etc...). Combine that, with their naval base in the Bahamas, their growing influence in Venezuela (and in Brazil shortly, and I think they are slowly moving into position.

17 posted on 08/17/2002 8:06:33 AM PDT by MattinNJ
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To: MattinNJ
I don't know if Global is that strategic. Techies on FR seem to think it is not. Comverse Infosys concerns me more in that regard.
18 posted on 08/17/2002 8:21:46 AM PDT by LarryLied
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To: LarryLied
Do you know if the Asia Global Crossing subsidiary of GS is also part of this deal?
19 posted on 08/17/2002 5:21:26 PM PDT by Aaron_A
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To: Aaron_A
"The 58 percent stake Global Crossing had in Asia Global Crossing (a former subsidiary) is also transferred to Hutchinson Whampoa and Singapore Technologies"--More
20 posted on 08/17/2002 6:28:53 PM PDT by LarryLied
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