Global Crossing sells to Asian carriers

Two Asian companies that failed in a previous bid to buy Global Crossing after it filed for bankruptcy in January have succeeded...

Two Asian companies that failed in a previous bid to buy Global Crossing after it filed for bankruptcy in January have succeeded in obtaining a majority investment in the company in a deal valued at $750m (£492m), Global Crossing announced last week.

Hutchison Telecommunications, a subsidiary of Hutchison Whampoa, a Hong Kong conglomerate, and Singapore Technologies Telemedia (STT) are investing $250m combined to take a 61.5% majority interest in Global Crossing.

The deal was approved at a New York District Court on Friday and also won support from Global Crossing's creditor groups, the company said.

Under the terms of the deal, Global Crossing's creditors and banks will get 38.5% of common equity in a reconstituted company, $300m cash and $200m in new debt in the form of senior notes.

The investment in the company plus the offer to the creditors add up to $750m. The company will keep its national UK 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 $750m, was rejected by creditors in May. The company listed assets of $12bn and liabilities of $22bn when it filed for bankruptcy.

Global Crossing, which operates an extensive undersea fibre-optic cable network, still has to submit a plan for reorganisation under Chapter 11 of the US bankruptcy law, which must be approved by the court.

That plan is expected to be filed next month 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 US and is frequently mentioned by lawmakers advocating reform of business and accounting practices.

The company is under investigation by the US Securities and Exchange Commission and the Department of Justice, as well as the 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 executives have said. The company has pledged full co-operation in the investigations.

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