Hutchison Whampoa Ltd (和記黃浦) and Singapore Technologies Telemedia Ltd asked creditors of Global Crossing Ltd to forgive all of its US$12.4 billion debt under their rescue plan for the bankrupt communications network operator.
In return, creditors would jointly own 21 percent of the reorganized company and receive US$300 million in cash. The new company, 79 percent owned by Hutchison and ST Telemedia, would issue US$800 million in new debt, according to public documents filed at the US Bankruptcy Court in Manhattan.
Hutchison, controlled by Hong Kong billionaire Li Ka-shing (
"The creditors are being asked to put their faith in Li Ka-shing," said Yvonne Leung, who manages technology company investments at Towry Law (Asia) Ltd in Hong Kong and is a Hutchison shareholder. "He's shown before an incredible ability to turn things around and make some serious money from little."
The reorganized company will have a board of not more than 10 members, of which at least eight will be chosen by Hutchison and ST Telemedia, according to the court filing.
The document said the offer to creditors requires "all of Global Crossing's existing bank debt, bond debt and claims relating to entities having filed for bankruptcy protection to be eliminated." Hutchison, itself a creditor, has agreed not to receive any compensation for surrendering US$400 million of preferred stock, convertible into equity of Global Crossing, that it bought in January 2000, the document said.
Hutchison and ST Telemedia will each invest US$375 million in exchange for a combination of senior convertible preferred stock and common shares. The US$300 million to be distributed to creditors will come from the cash of the reorganized company, according to the document. Earlier, a report by financial-news Web site FinanceAsia.com gave details of the court filing.
After the revamp, Global Crossing needs to have at least US$1 billion in net working capital, including a minimum cash balance of US$700 million as of Sept. 30 this year, the document said.
Global Crossing posted a US$4.6 billion loss on sales of US$2.4 billion for the first nine months of last year. It ended the period with assets of US$25.5 billion and liabilities of US$14.6 billion, according to the filing.
In its bankruptcy filing last week, Hamilton, Bermuda-based Global Crossing cited debt of US$12.4 billion. It incurred the debt building a fiber-optic network linking the US, Europe and Asia. The company, has been hurt by overcapacity and slowing demand for phone and data services.
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