RealTime IT News

IDT Throws Curve Ball with Global Crossing Bid

IDT Tuesday made a bid in bankruptcy court Tuesday for the troubled fiber optic company Global Crossing Ltd. for $255 million.

IDT's bid comes as Global Crossing is seeking final regulatory approval from U.S. government security agencies for the sale of the company for $250 million to Hong Kong's Hutchison Whampoa Ltd. and Singapore Technologies Telemedia Pte.

At issue for the federal government, and certain agencies, such as the FBI, CIA and Defense Department, is whether the sale of the company by a foreign company and foreign government would pose any national security threats.

Global Crossing controls both a worldwide and U.S.-based fiber-optic network, and the Hutchison-Singapore partnership has already received full bankruptcy-court approval for the deal. That deal would give Hutchison-Singapore a 61.5 percent stake in Global Crossing. Global Crossing filed for Chapter 11 bankruptcy protection back in January 2002.

It is unclear whether IDT's last minute bid will have any impact on Global Crossing's planned sale. However, if the U.S. government was to block its planned deal with its Asian partners, then IDT would likely be interested in pushing forward with its counterbid.

IDT has been moving to buy the assets of other troubled telecom companies, including an offer to buy two units of Worldcom, Inc. for close to $5 billion.

Under Global Crossing's proposed deal, the Asian investors would pour $250 million in cash immediately for a controlling stake in the fiber-optic company, whose assets are estimated to be worth $22 billion.

Global Crossing is under intense pressure from its creditors, and its Asian investors would pay creditors an additional $300 million in cash, following the culmination of the bankruptcy reorganization. After paying down its debt, it is expected that creditors would issue the reorganized Global Crossing $200 million in new debt.

ST Telemedia and Hutchison Whampoa have until April 30th to complete the reorganization of Global Crossing, and no other offers can be considered by the bankruptcy court before that date. IDT's Jim Courter, the company's CEO and former Congressman, argues that Global Crossing's assets should only be sold to a U.S. company, rather than an overseas concern, because its network carries confidential, even classified data from several top U.S. government agencies.

The Asian partners have received regulatory approval from the U.S., U.K. and European Union, but await final approval from the FCC and the Committee on Foreign Investment in the U.S.

In a press release issued Tuesday by IDT, the company's chairman Howard Jonas is quoted saying "would we give the keys to the Justice Department buildings or the board rooms of some of our largest corporations to a foreign government so they could listen in? Absolutely not. The idea is absurd."