RealTime IT News

Global Crossing Expands Restructuring

Global Crossing Ltd. , fresh from the collapse of merger talks with its Asian counterpart, Asia Global Crossing, unveiled a greatly expanded restructuring plan Tuesday.

In October, the company eliminated the position of president and chief operating officer. It also reshuffled its senior management, naming a new chief executive, executive vice president of Business Sales and Marketing, executive vice president of Carrier Sales and Marketing, senior vice president of Product Management, senior vice president of Corporate Communications, and president of Business Services. It also said it would cut 2,000 jobs worldwide.

Now the company plans to cut expenses by an additional $550 million by eliminating 1,200 more jobs and refocusing its strategy on commoditized POP-to-POP broadband transmission. It also plans to scale back its value-added services business.

The decision comes on the heels of a weak third quarter in which the company reported recurring adjusted EBITDA of $47 million after providing guidance in early October that the number would be closer to $100 million. Along with its third quarter results, the company scaled back fourth quarter and stretch 2002 guidance Tuesday.

"GX's scaled back model, with lower 2002 capex, increases survivability odds and supports high tier debt valuations but does not add incremental equity value, in our view," Goldman Sachs & Co. analyst Frank Governali said Wednesday.

GS maintained a market perform rating on Global Crossing, and cut fourth quarter and 2002 estimates to reflect the new guidance.

"Based on our new numbers, which assume $400 million in asset sale proceeds, GX is barely funded through 2002," Governali said. "However, we do not expect GX to meet current debt covenants. GX is currently negotiating covenant terms with its creditors."