GlobalX Fate Unwinds in Court
As this went to press, the U.S. Bankruptcy Court for the Southern District of New York was hearing arguments about whether to grant Global Crossing an extension on its plan to be acquired by Singapore Technologies Telemedia Pte. Ltd. (STT).
If the extension's turned down, that could open the way for new bidders, including XO Communications Inc. (OTC: XOXO) and IDT Corp., to step in with offers for Global Crossing's debt and assets -- something the present management has resisted until now.
Global Crossing has asked the court to give it until mid-October 2003 to fend off buyers other than STT. Last month, STT wound up the lone proposed purchaser of the company when Hutchison Whampoa Ltd. (Hong Kong: 0013) was nixed by the U.S. Treasury's Committee on Foreign Investments in the United States (CFIUS) (see What's to Become of Global Crossing?).
The kerfuffle followed a backfired attempt by Global Crossing to obtain the necessary approvals by enlisting defense advisor Richard Perle (see Global Crossing's Pal Perle Backs Off and Pentagon Pal Perle Gets GX Paycheck).
Now, Global Crossing's creditors are fed up with what they say is a deliberate attempt by company management to force them to accept a less-than-adequate arrangement. In court documents, lawyers for JPMorgan Chase Bank, the administrative agent of the senior secured lenders of Global Crossing, state other objections to the beleaguered carrier's plan for reemergence.
The lenders say there's no reason to assume STT, as a foreign-owned company, won't run into CFIUS holdups as Hutchison allegedly did, given the U.S. government's current stance on security issues and foreign ownership of telecom assets. They also object to Global Crossing's desire to set a deal-breaking fee of $30 million for the STT arrangement, and they don't like its plans to forgive any liability Hutchison may have as a result of backing away from the original plan. It's unrealistic to set these items in stone, the lenders claim.
What's more, instead of paying its bills, they say, Global Crossing execs have awarded themselves "rich bonuses," including $1 million to CEO John Legere. They've run through hundreds of millions of dollars without showing results.
The lenders also indicate Global Crossing's wrong to fend off bidders like Carl Icahn, who, on behalf of XO, yesterday offered a total of $495 million to purchase Global Crossing's bank debt -- on top of a May offer of $700 million for Global Crossing's assets.
IDT also offered $255 million back in February 2003 for a share of Global Crossing's assets. IDT expressed its interest in working with STT at Global Crossing during its earnings call last month. But the lenders say IDT's been ignored.
In a statement Monday, Global Crossing's board of directors countered several of the lenders' points, saying the company has been on track with its restructuring and has plenty of cash to see it through the early fall, when the merger with STT is anticipated to go through without a CFIUS hitch and the carrier should emerge from bankruptcy.
Further, Global Crossing was well within its means in awarding executive bonuses, say the directors: "As a result of the company's achievements in 2002, all eligible employees, not just management, received annual bonuses after exceeding 2002 fiscal objectives approved by our Board and creditors."
An STT spokeswoman has said that the carrier continues to be committed to the arrangement with Global Crossing.
There are other arguments afoot in this matter, such as the position of Global Crossing's unsecured creditors, which appears to line up in favor of the carrier and STT.
But one thing at a time. Once today's courtroom drama is decided, there will no doubt be other voices raised in an ongoing cacophony of motions and countermotions as Global Crossing's legal schmegal nears its conclusion.
— Mary Jander, Senior Editor, Light Reading