Two Asian companies that failed in a previous bid to buy Global Crossing Ltd. after it filed for bankruptcy in January have succeeded in obtaining a majority investment in the company in a deal valued at US$750 million, Global Crossing announced Friday.
Hutchison Telecommunications Ltd., a subsidiary of Hutchison Whampoa Ltd., a Hong Kong conglomerate, and Singapore Technologies Telemedia Pte. Ltd. (STT) are investing $250 million combined to take a 61.5 percent majority interest in Global Crossing. The deal was approved at a hearing Friday in the Bankruptcy Court for the Southern District of New York and also won support from the Global Crossing's creditor groups, the company said.
Under terms of the deal, Global Crossing's creditors and banks will get 38.5 percent of common equity in a reconstituted company, $300 million cash and $200 in new debt in the form of senior notes, Global Crossing said. The investment in the company plus the offer to the creditors add up to $750 million. The company will keep its national U.K. business, conferencing division and Global Marine, which consists of three businesses it had considered selling to bring in cash.
Customers of those businesses and other customers should expect uninterrupted service, the company said.
A previous offer from Hutchison and STT, also valued at $750 million, was rejected by creditors in May. The company listed assets of $12 billion and liabilities of $22 billion when it filed for bankruptcy.
Global Crossing, which operates an extensive undersea fiber-optic cable network, still has to submit a plan for reorganization under Chapter 11 of the U.S. bankruptcy law, which must be approved by the bankruptcy court. That plan is expected to be filed in September and the company has forecast that it will emerge from bankruptcy early next year.
Global Crossing is one of a number of IT and telecommunications companies under federal investigation in the U.S. and is frequently mentioned by lawmakers advocating reform of business and accounting practices. The company is under investigation by the U.S. Securities and Exchange Commission and the U.S. Department of Justice, as well as the U.S. House Committee on Energy and Commerce and the House Subcommittee on Oversight and Investigations. The first three are looking into Global Crossing's accounting practices, while both of the house committees have demanded documents and access to employees in an investigation trying to determine whether documents were shredded.
An internal investigation found that allegations of document shredding were unsubstantiated, Global Crossing officials have said. The company has pledged full cooperation in the investigations.
Global Crossing is based in Hamilton, Bermuda, with U.S. headquarters in New York.