What's Next for GX?

In the final minutes of the year 2001, the bankers owed by wholesale service provider Global Crossing Ltd. (NYSE: GX) have helped the company avoid bankruptcy by giving it 45 more days to raise the funds needed to pay off some $2.25 billion in loans (see Banks Give GX a Waiver).

The market responded favorably to the news on Monday, though Global Crossing is in no way out of the woods yet. Its shares finished the day up $0.23 (38%) to $0.84 in afternoon trading. The company's stock has lost about 94 percent of its value this year.

Global Crossing said Friday that if the banks had not given it a waiver, it would have violated several conditions of its debt agreements with lenders on December 31. Those violations would have meant that the banks could have called for immediate repayment, which would have forced Global Crossing into bankruptcy.

It's not a surprise that the banks are working with Global Crossing, because forcing the company into bankruptcy and a sale of its assets would not likely garner as much money as a turnaournd. Global Crossing had about $2.26 billion in cash and equivalents as of the period ending September 30, but the company was also carrying $7.6 billion in long-term debt. During that quarter, the company also reported a net loss of $3.3 billion.

With the borrowed time from its bankers, Global Crossing can continue trying to round up new investment dollars – either from strategic investors such as customers or other banks. "We expect to continue discussions with our bank lenders about the terms of our bank credit agreement as we pursue discussions with potential equity investors," said Global Crossing CEO John Legere, in a statement issued by the company last week.

This, the first public admission that Global Crossing is seeking outside investors, helped boost the stock Monday, but it could also be seen as a further sign of the company's weakness. "They're indicating to the market that they can't do it alone," says Pat Comack, a telecom analyst at Guzman & Co.

That Global Crossing is in such deep trouble has sent a shudder through the telecom world. The company's massive network links 27 countries and more than 200 major cities in Europe, North America, South America, and Asia. Its customers include huge financial exchanges, such as the New York Stock Exchange; trading floors, such as Merrill Lynch & Co. Inc. and J.P. Morgan & Co.; and telecommunications providers such as Deutsche Telekom AG (NYSE: DT). There's no telling what would happen if the company's financial problems forced it to go dark.

Also troubling is that Global Crossing won't say which investors it's talking to, nor has it made any public comment as to what other ways it might try to raise the needed funds. The company also won't give details as to what cash balances its creditors are requiring it to maintain for the next few weeks under the granted waiver.

So how will Global Crossing raise some quick cash? Several analysts – among them Vik Grover at Kaufman Bros. LP – have suggested a few solutions, including:

  • Selling non-core assets, including the company’s undersea systems integration business, Global Marine Systems. (Last quarter, the company wrote down some $545 of goodwill related to what it expects to lose when it sells the Global Marine Systems business. Also, rumors have surfaced that the company recently tried – and failed – to unload its Racal Telecom assets to one buyer at a 50% percent discount. Global Crossing bought Racal in 1999 for about $1.6 billion in cash.)

  • More layoffs. (The company has already cut 3,200 jobs in 2001.)

  • Cut capital spending. Again. (Global Crossing expects to spend $1 billion to $1.25 billion in 2002. The company spent $1.04 billion in Q3 2001 alone, more than it will spend all of next year.)

  • Revisit a combination with the company’s Asian unit, Asia Global Crossing Ltd. (NYSE: AX), to eliminate redundancies.

At this point, Global Crossing is going to have to make some hard choices as it continues to race the clock. "If they don't pull off significant [network capacity] sales and execute some asset sales, I don't know if they'll make it through 2002," says Guzman's Comack.

— Phil Harvey, Senior Editor, Light Reading
Litewave 12/4/2012 | 11:07:17 PM
re: What's Next for GX? Well, Lucent sure picked a winner ;-)
Now we know where GX wasted their $$ don't we.


Global Crossing first to purchase Lucent Technologies' all-optical switch


Lucent WaveStar(R) LambdaRouter, developed by Bell Labs, is 16 times faster than electronic switches used in today's communications networks

MURRAY HILL, N.J. - Lucent Technologies (NYSE: LU) today announced that Global Crossing (NYSE: GX) will be first to purchase the Lucent WaveStar(R) LambdaRouter, the world's first high-capacity, all-optical switch for communications networks.

Under the multi-million dollar agreement, Global Crossing will deploy LambdaRouters in the United States and in Europe. The LambdaRouters will connect, send and distribute data traffic on Global Crossing's multi-cable, trans-Atlantic optical network. Lucent plans to begin installing the systems this month, with completion scheduled for the third quarter of this year.

Developed by Lucent's Bell Labs in 18 months, the LambdaRouter is 16 times faster than electronic switches used in communications networks and can route billions of e-mail messages every second.

At the heart of the LambdaRouter are two sets of 256 microscopic mirrors, with each set on a one-square-inch silicon base. With the aid of sophisticated software, the mirrors are tilted to reflect, or direct, wavelengths from an incoming fiber to an outgoing fiber route, thus eliminating the slow and power-consuming conversion to electrical signals in today's long-haul networks.

"Lucent's LambdaRouter provides our Atlantic mesh network with improved speed, reliability and failure protection," said Wally Dawson, executive vice president-Global Network of Global Crossing. "Maintaining all-optical traffic through the LambdaRouter will enable Global Crossing to offer 'instant Internet' and deliver other high-speed data and video services more quickly, securely and cost effectively. It is yet another step we have taken to provide our customers with the world's highest level of network performance."

Global Crossing's network is the industry's first mesh-protected, trans-Atlantic network. Mesh protection is an engineering approach that protects transmission of data traffic by allotting reserve optical capacity within the existing multi-cable network in case of downtime on one or more of the optical cables.

"Lucent Technologies and Global Crossing expect to change the way the world thinks about global information networking," said Jeong Kim, president of Lucent's Optical Networking Group. "With innovations from Bell Labs, Lucent's optical networking expertise is unrivalled. Lucent is working to move the industry toward an all-optical network with many high-speed data and video services."

Today's announcement follows Global Crossing's successful testing of the LambdaRouter last year between New York City and England. Several other Lucent customers are testing the LambdaRouter.
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