Global Crossing Files For Chapter 11

Global Crossing , a worldwide voice and data carrier for
telecommunications companies around the world, filed for Chapter 11
bankruptcy protection Monday morning, officials announced.

Operations will continue as normal, thanks to a $750 million cash
investment from two firms, Hutchison Whampoa Limited and Singapore
Technologies Telmedia Pte, Ltd., which should go a long way to reassuring
its fiber optic customers and investors.

John Legere, Global Crossing chief executive officer, rushed to reassure
those individuals with a statement released Monday morning.

“Ours is a balance sheet issue, not an operational one,” he said, “Today’s
actions are intended to directly address this issue. Even with the
financial uncertainty we’ve recently experienced, customers have continued
to choose our network over many others. With this restructuring, we’ll put
financial uncertainty behind us and the power of our network will once
again become the primary factor in the minds of our customers.”

The bailout comes at a cost for Global Crossing: the $750 million deal
gives the two companies equity interest in the company, though how much of
a stake they have in the company is uncertain at this time.

Darren Jacobs, director of TFS Telecom, a New York-based telecommunications
risk management and brokerage company, said the Chapter 11 filing is
symptomatic of the troubles facing all carrier’s who provide lines for
telcos one that won’t be cleared up anytime soon.

“Building assets to be a carrier’s carrier continues to prove a non-viable
business model at this juncture,” he said. “While we have been waiting for
the killer application, the dotcom era boomed and busted, and with it the
expected demand that every next-generation carrier providing long haul
capacity had built in anticipation of.

“Further complicating matters is the issue of the last mile,” he
continued. “Often times, the cost of the local loop is prohibitive and
exceeds the cost of the long-haul. The industry will shake out and
consolidate further, eventually lending itself to a smaller number of
providers and eventual price stability. The question with no clear answer
is when.”

Both investing companies already have a deep commitment with Global
Crossing, with ties that find its roots in Asia, where Global Crossing has
a major stake in the region.

Asia Global Crossing , a parent company spin off that’s been
trying to merge again
with Global Crossing the past year, is a 50
percent shareholder of StarHub Crossing
, a network company out of
Singapore. Singapore Technologies owns the other 50 percent. Asia Global
Crossing owns 50 percent of Hutchinson Global Crossing, a Hong Kong
carrier Hutchinson Whampoa owns the other 50 percent.

“We believe this new equity investment from parties as strong as Hutchison
Whampoa and Singapore Technologies Telemedia validates our confidence in
the strong future of our company,” Legere said. “This investment, along
with the financial and operational restructuring that we’re implementing,
will strengthen our balance sheet and enable Global Crossing to build a
sustainable business upon its existing unmatched global network.”

Early morning trading on Wall Street showed Global Crossing stock down 41
percent, hovering at 30 cents per share.

Asia Global Crossing distanced itself from the bankruptcy talks this morning.

According to a statement released shortly after the Global Crossing, Asia
Global Crossing officials said, “while (we) are not the same company,
Global Crossing owns 58.8 percent of the equity in Asia
Global Crossing. However, Asia Global Crossing is a separate corporation,
with separate stockholders, creditors, employees, network assets and

On a related note, New York Stock Exchange officials told Asia Global
Crossing executives they were not in compliance with listing standard,
which require all publicly-traded companies to maintain a minimum $1 price
per share. The carrier has 60 days to “demonstrate compliance” or be

Currently, the stock runs at 60 cents per share and officials have hired
Lazard Freres & Co. LLC to help turn their operations around.

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