Global Crossing's Asset Limbo
So will Thursday be the final date for the auction? “We hope so,” says Kirstin Orben, a spokesperson for Global Crossing.
The date of the auction isn’t the only thing that’s uncertain in this saga. While the company itself isn't disclosing any information on the bidders or how much has been offered, word on the street is that Hutchison Whampoa Ltd. and Singapore Technologies Telemedia Pte. Ltd. (STT), which saw their joint bid for Global Crossing fall through in May, are once again the most likely winners of the auction (see GlobalX: The Burst Bubble and Global Garage Sale Coming? ). And not only is the Asian consortium back in the bidding game, it stands to get Global Crossing’s assets for a lot less than it originally offered.
"I’d be surprised if they [Global Crossing] recover everything that was being offered,” says Andrei Jezierski, an analyst with the consulting firm, i2 Partners LLC.
After Global Crossing filed for the fifth-largest bankruptcy in corporate history on January 28 this year, Hutchison and STT offered $750 million for 79 percent of the company (see Global Crossing: A Potential Bailout from Across the Globe). Creditors reportedly killed the deal in May because it wouldn’t bring them enough cash (the company says its assets are worth about $22 billion). But in the new deal, creditors won’t get any cash, according to reports. Instead, they will receive convertible paper that will turn into shares of Global Crossing once it reemerges from bankruptcy. The creditors are expected to retain possession of 21 percent of the company.
While it's now looking like a mistake for Global Crossing’s creditors to have turned down the earlier offer, Jezierski says it’s not fair to chastise the creditors for lack of foresight.
“It’s easy to judge in hindsight,” he says “Things were going badly, and then suddenly they got a lot worse.”
Telecom assets, which had already lost most of their value as the telecom bubble deflated, have been beaten to a pulp following the summer’s corporate scandals, led by WorldCom Inc.'s (OTC: WCOEQ) bankruptcy and Qwest Communications International Inc.'s (NYSE: Q) announcement that it will soon restate earnings after improperly accounting for more than $1 billion (see Global Crossing: More Questions, WorldCom Goes Boom, WorldCom Files for Bankruptcy and Qwest Backtracks Fast).
While interest in telecom assets has dwindled, there are other potential buyers of Global Crossing or parts of its assets. One likely candidate is a joint bid from Gores Technology and Platinum Equity LLC, run, respectively, by brothers Alec Gores and Tom T. Gores. Competitor Level 3 Communications Inc. (Nasdaq: LVLT), which received a $500 million investment backed by, among others, Warren Buffet last month, has also submitted a bid for the company (see Buffett Boosts Level 3).
As the telecom industry continues to shrivel, most of the bidders that were disclosed back in April are probably no longer in the game. At that time, the cat slipped out of the bag when a lawyer at Weil Gotshal & Manges LLP sent out an email to all the interested parties without hiding the names of its addressees (Ooops!). British Telecom (BT) (NYSE: BTY), Cable & Wireless (NYSE: CWP), Deutsche Telekom AG (NYSE: DT), and Verizon Communications Inc. (NYSE: VZ) were among the carriers on the list.
"On the face of things, it makes much more sense for an international player to go after [Global Crossing’s] plum U.S. assets at bargain price,” Jezierski says. “At this point, I expect that there will be next to no interest from U.S. carriers.”
Even people working inside Global Crossing don't seem to know who will walk away with the deeds on Thursday, but one source with the company says there's anticipation that the carrier will be sold off in one, large chunk.
According to a Global Crossing court filing today, the auction will be held in the law offices of Weil Gotshal & Manges in New York, at 10 a.m. on Thursday. The auction hearing, originally scheduled for today, has also been postponed until Thursday, and will start at 2 p.m., New York time.
— Eugénie Larson, Reporter, Light Reading