Overseas Bailout for Undersea Network - TheStreet

Overseas Bailout for Undersea Network

A bankruptcy filing will preserve Global Crossing's business, but not shareholders' value.
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Global Crossing

(GX)

agreed to sell a controlling stake to two Asian partners through a prepackaged Chapter 11 filing, ending one of the wilder rides of the Internet stock bubble.

The transaction with Hutchison Whampoa and Singapore Technologies will cancel out existing Global Crossing common and preferred stock. Shares of the data and voice carrier had traded for more than $60 in March 2000 but fell steadily as the company struggled with a huge debt load and too few customers for its high-speed global fiber-optic network.

Shares of the Hamilton, Bermuda-based company closed Friday at 51 cents before being halted for Monday's announcement.

The deal will pay existing creditors with a combination of cash, new debt and new equity in the reorganized firm. The transaction is conditioned on a bankruptcy court approving the reorganization by the end of August.

"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," The company said in a statement. "With this restructuring, we believe we can become the global leader providing networking services among the world's top 200 cities to global enterprises and carriers."

Global Crossing said it would continue to operate normally during the restructuring.

Hutchison Whampoa and Singapore Technologies already have business relationships with Global Crossing and its affiliates. Asia Global Crossing and Hutchison Whampoa each own 50% of Hutchison Global Crossing, a telecommunications service provider in Hong Kong providing fixed-line, Internet and data services. Asia Global Crossing and a unit of Singapore Technologies Telemedia each own 50% of StarHub Crossing, which owns and operates a high-capacity backhaul network in Singapore