Global Crossing Files For Chapter 11

by Jason Gorringe, Tax-News.com, London

29 January 2002

Bermuda-based Global Crossing filed for Chapter 11 bankruptcy protection in the US on Monday morning. Global Crossing is listed on the NYSE, and its shares fell by around 40% in early Wall Street trading from the opening level of 60 cents. New York Stock Exchange officials had just told Asia Global Crossing executives they were not in compliance with listing standards, which require all publicly-traded companies to maintain a minimum $1 price per share. The carrier has 60 days to "demonstrate compliance" or be de-listed.

Global Crossing, a worldwide voice and data carrier for telecommunications companies, announced simultaneously that operations will continue as normal, thanks to a $750 million cash investment from two firms, Hutchison Whampoa Limited and Singapore Technologies Telmedia Pte, Ltd. It's not yet clear how much of Global Crossing's equity will now be held by the two investors.

Asia Global Crossing, a demerged company that's been trying to merge again with Global Crossing the past year, is a 50% shareholder of StarHub Crossing, a Singapore network company which has Singapore Technologies as its other 50% shareholder. Asia Global Crossing also owns 50% of Hutchinson Global Crossing, a Hong Kong carrier - Hutchinson Whampoa owns the other 50%.

John Legere, Global Crossing chief executive officer, rushed to reassure those individuals with a statement released Monday morning:

"Ours is a balance sheet issue, not an operational one," he said, "Today's actions are intended to directly address this issue. Even with the financial uncertainty we've recently experienced, customers have continued to choose our network over many others. With this restructuring, we'll put financial uncertainty behind us and the power of our network will once again become the primary factor in the minds of our customers."

"We believe this new equity investment from parties as strong as Hutchison Whampoa and Singapore Technologies Telemedia validates our confidence in the strong future of our company," Legere said. "This investment, along with the financial and operational restructuring that we're implementing, will strengthen our balance sheet and enable Global Crossing to build a sustainable business upon its existing unmatched global network.''

Asia Global Crossing distanced itself from the bankruptcy talks this morning. According to a statement released shortly after the Global Crossing, Asia Global Crossing officials said, "while (we) are not the same company, Global Crossing owns 58.8% of the equity in Asia Global Crossing. However, Asia Global Crossing is a separate corporation, with separate stockholders, creditors, employees, network assets and operations."

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