Global Crossing ( GBLXQ.PK) 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.

Global's stock was trading down 51% to 2 cents Friday.

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