Global Crossing Emerging From Bankruptcy


Global Crossing Ltd., a company synonymous with the telecommunications industry's rip-roaring boom and humbling comedown, is emerging from bankruptcy after spending nearly two years reorganizing in Chapter 11.

Global Crossing has a new board of directors and new top executives. It has cut its work force in half, moved its main offices from Beverly Hills, Calif., to Florham Park, N.J., and slashed long-term debt to just $200 million from $11 billion.

What has not changed much is the company's ability to pump data and long-distance calls around the world for big businesses, governments and other telecom carriers.

However, analysts say the conditions that originally ravaged Global Crossing - namely, too much capacity on telecom networks that cost billions to build - also haven't changed much.

"I would guess that in the first year, they're going to have a tough time breaking even," said Berge Ayvazian, senior research fellow with The Yankee Group, an analyst firm. "They don't have much margin for error."

The company's reorganization plan has won court approval, and the emergence from bankruptcy is expected to become official this week.

Global Crossing spent billions during the telecom and Internet boom building a 100,000-mile network of undersea cables and fiber-optic lines, but demand failed to materialize as quickly as the company had hoped. The company's collapse vaporized about $50 billion of investors' money.

In January 2002, Global Crossing filed the largest telecom bankruptcy in history, though WorldCom Inc. broke that record only six months later.

In congressional hearings, Global Crossing's ex-chief, Gary Winnick, came under fire for selling $735 million of stock before the company's fortunes plummeted. The old management team also was faulted for swapping network capacity with other carriers in a bid to pump up revenue.

Federal investigations and lawsuits by shareholders and employees still hang over the company. Global Crossing took a step toward closing the door on its past Monday by filing its 2002 annual report with the Securities and Exchange Commission, in which it restated earnings for 2000 and 2001.

Although Global Crossing declared $22 billion in assets when it went into bankruptcy, Singapore Technologies Telemedia, which is owned by the Singapore government, was able to buy 61.5 percent of the company for just $250 million. Creditors will own the rest.

Global Crossing could reap the benefits of the telecom industry's increasing embrace of routing phone calls with a data technology known as voice over Internet protocol. The method is more efficient and enables new communications features.

But several other companies are fighting for the same kinds of business because the industry never went through the significant consolidation that was expected two years ago. Not only is Global Crossing making a new start, but WorldCom, now known as MCI, is expected to do so soon as well.

"It appears that nobody is willing to leave their bar stool," UBS Warburg analyst Uberto Ferrari wrote in a research note Tuesday.

Global Crossing still has a ways to go. Its revenue fell to $3.1 billion last year from $3.7 billion in 2001, and the company's continuing operations showed a pretax loss of $398 million.

Global Crossing may try to help turn things around with lucrative contracts to carry sensitive U.S. government, military and law enforcement communications traffic. Global Crossing already performs communications services for the British government.

As part of winning U.S. approval for its sale to investors in Singapore, Global Crossing agreed to create a national security committee on its board that would be responsible for making sure government communications on Global Crossing's network remain secure.

The members of the committee, named Monday, have military experience or have worked as defense contractors: Pete Aldridge, a former U.S. undersecretary of defense, Archie Clemens, Donald Cromer and Richard Erkeneff.

Other new board members include a new chairman, Lodewijk Christiaan van Wachem, ex-president of the Royal Dutch Petroleum Co.

The vice chairman, Peter Seah, is CEO of Singapore Technologies Group, the parent of Singapore Technologies Telemedia. ST Telemedia's head, Lee Theng Kiat, also has a seat on Global Crossing's board.

A previous Global Crossing-Pentagon connection emerged in March, when the company paid Richard Perle $125,000 to serve as a consultant while it was trying to win approval for its sale to Singapore Technologies Telemedia and Hutchison Whampoa, a Hong Kong-based conglomerate that later dropped out of the deal.

At the time, Perle was chairman of a civilian advisory group for the Department of Defense. He quit as chairman but stayed on the board.

Copyright 2003 Associated Press. All rights reserved.