Global Crossing Files for Bankruptcy
PHILADELPHIA – High-speed communications services company Global Crossing Ltd. said on Monday it filed for bankruptcy, and business partners in Asia agreed to provide a $750 million cash investment for a majority stake in the company.
The bankruptcy by Hamilton, Bermuda-based Global Crossing, which had been widely expected, is one of the largest filings by a telecommunications company in history. Global Crossing, the latest emerging telecommunications company to stumble under a high debt load and flagging stock price, said it had $22.4 billion in liabilities and $12.4 billion in assets.
Under the reorganization, existing common equity and preferred shareholders would not get a stake in the reorganized company. Global Crossing said its creditors would get a combination of cash, new debt, and new equity in the restructured company.
Global Crossing struggled with the debt incurred from building its global network, which links more than 200 major cities in 27 countries. The one-time Wall Street darling suffered further from slack demand and declining prices for bandwidth capacity.
Trading in shares of Global Crossing were halted for the bankruptcy announcement. The stock has fallen about 96 percent over the past year and closed on Friday at 51 cents a share.
The company said its worldwide operations would be unaffected by the filing and customers will not experience any changes in their service. Employees will continue to be paid their wages and other benefits without interruption.
Under the reorganization, Hutchison Whampoa Ltd. (0013.HK) and Singapore Technologies Telemedia Pte. Ltd. agreed to provide $750 million cash for a joint majority stake. The proposed investment is conditional on the confirmation of a plan of reorganization by the courts before the end of August 2002.
Global Crossing said it and certain of its affiliates began Chapter 11 proceedings in the U.S. Bankruptcy Court for the Southern District of New York, and coordinated proceedings in the Supreme Court of Bermuda.
Hutchison Whampoa and Singapore Technologies Telemedia already have business relationships with Global Crossing and its affiliates. Asia Global Crossing and Hutchison Whampoa each own 50 percent of Hutchison Global Crossing, a leading telecommunications service provider in Hong Kong providing fixed-line, Internet and data services. Asia Global Crossing and a subsidiary of Singapore Technologies Telemedia each own 50 percent of StarHub Crossing, which owns and operates a high capacity backhaul network in Singapore.
Market rumors of a bankruptcy filing by Global Crossing have swirled since August. In December, media reports said Hong Kong billionaire Li Ka-shing might invest up to $1 billion in the company, and Germany's Deutsche Telekom AG might also provide funding.
In November, Global Crossing posted a third-quarter loss of $3.4 billion, or $3.84 per share, compared with a $602.4 million loss, or 69 cents a share, in the year-earlier period. It expects to report its fourth-quarter results on Feb. 26.