- The Washington Times - Saturday, August 10, 2002

NEW YORK (AP) Bankrupt cable-network company Global Crossing yesterday sold itself for $250 million to the same investors who only months ago agreed to pay three times as much for the world's most extensive fiber-optic network.

The agreement announced yesterday with Hutchison Whampoa of Hong Kong and Singapore Technologies was approved by the judge overseeing Global Crossing's bankruptcy case.

The deal provided startling proof of how fast the business of fiber-optic networks continued to disintegrate in an environment poisoned by the WorldCom accounting scandal and a global glut of capacity for Web traffic and electronic commerce.

It also appeared that Global Crossing's lenders and creditors made a costly miscalculation in holding out for a better payoff on their debts, which totaled $12.4 billion when the company filed for bankruptcy in late January.

An outside financial adviser to Global Crossing who was called to testify at a hastily scheduled hearing early yesterday said three credible bids had been received during a lengthy auction process and that bidders were spooked by the ongoing collapse of the business.

"It's a very difficult world today in the telecommunications industry," said Arthur Newman, a senior managing director for the Blackstone Group.

Under the original deal, announced in January with the bankruptcy filing, Global Crossing's debt holders would have split $300 million in cash and an additional $800 million in new notes.

Now they will receive $300 million in cash, but $200 million in notes. They will retain a larger stake of the equity in the new firm: 38.5 percent rather than the 21 percent envisioned under the earlier deal.

Although Hutchison and Singapore will receive a smaller controlling stake 61.5 percent instead of the 79 percent stake rejected in the first deal they will pay $125 million each in cash rather than the combined $750 million they were willing to pay in January.

Owners of the Bermuda company's stock will receive no stake in the reorganized company.

Attorneys for Global Crossing told the court that the company expected to file a Chapter 11 plan of reorganization in September and to emerge from bankruptcy in early 2003, subject to satisfying contractual and regulatory conditions.

Global Crossing, which was founded by investment banker Gary Winnick in 1997, piled up its debt by building a vast worldwide communications network at the height of the Internet boom.

The network spans 100,000 miles, connecting more than 200 cities in 27 countries.

The system includes 20 percent of undersea bandwidth connecting the United States with the rest of the world, according to the telecom research firm TeleGeography.

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