Orphaned TBI Seeks New, Rich Daddy

by Mike Godfrey, Tax-News.com, New York

09 August 2001

More than a month after Canadian telecommunications company 360networks and its principal US subsidiary both filed for protection from their creditors, Bermudian subsidiary TeleBermuda International (TBI) has no clue about its future.

Chief Executive Officer James Fitzgerald said last night that a number of organisations and individuals had expressed an interest in taking over TBI – which handles 50 percent of long distance calls on the island and is profitable – but no discussion had been held and there was no serious buyer on the horizon.

TBI has a duopoly over off-island telecommunications with Cable and Wireless, and the two companies were also controversially given access 18 months ago to the protected domestic Internet sector in an attempt by Telecommunications Minister Renee Webb to increase competition on the island.

TBI's parent Globenet was bought by 360networks for $1 billion in March 2000 at the height of the telecommunications fibre-optic feeding frenzy. Two weeks ago, the company, headed by former Microsoft Corp. chief executive Greg Maffei, was de-listed from Nasdaq - it had debuted on the exchange in April 2000 at $14 per share. The shares were valued at 21 cents when trading was halted last month. 360networks' shares on the Toronto Exchange closed on Thursday at 20 Canadian cents, down 7 Canadian cents from Wednesday's close, and a far cry from their all-time high of C$35.90.

The company believes it can rework itself from a global operation into one based only in North America, but has offered shareholders no assurances they would salvage any of their investment when the reorganization is complete, and has been unclear about whether or when it would dispose of assets.

Reported in the Bermuda Royal Gazette, Mr. Fitzgerald said last night that it was far too early to say what will happen. "At this moment, TBI is not for sale, but, by the same token, at the right price, anything is for sale. As you know, our parent company 360networks in the US has filed for Chapter 11 protection in the United States and Canada, and that does not affect us. We are completely solvent."

"However," he went on, "depending on what happens with 360networks over the next six months or so, they could indeed be interested in selling some of their assets and we are certainly one of their assets."

Any company that did take over TBI would have to get approval from the Bermudian Government under the terms of its licenses. Mr. Fitzgerald added: "It's far too early to say what will happen - we have just started this process. I think it will all unfold during the next four, five, six months. There is no-one seriously on the horizon and no offer on the table."

360networks has enough cash to continue its operations until the end of year, and may be hoping that it can salvage more than just its US operations, although its banks, J.P. Morgan Chase & Co. and TD Capital, a subsidiary of Toronto Dominion Bank, among others, would prefer that it auctions all of its assets to pay its debts, roughly $2.6 billion. 360networks claims that its assets are worth roughly $6.3 billion, but much of this value is probably locked up in expensively-laid fibre-optic capacity that may in the short term be more interesting to sharks with fins than the kind that live on Wall Street.

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