Transfer of value

pms laflame at aaahawk.com
Thu Jul 11 08:09:23 PDT 2002


Gee, which debt-free paid-for by common shareholder telecom network should I buy?

http://biz.yahoo.com/rf/020710/telecoms_globalcrossing_2.html

Wednesday July 10, 7:58 pm Eastern Time Reuters Market News Global Crossing Asset Sale Looks Tough, Analysts Say By Siobhan Kennedy

NEW YORK (Reuters) - If bankrupt telecoms firm Global Crossing was finding it hard to attract buyers before, WorldCom's accounting scandal has made it even harder to attract them.

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The deadline for bids to buy the assets of Bermuda-based Global Crossing Ltd. is Thursday. But analysts said the turmoil in the telecommunications industry -- exacerbated by WorldCom's revelation that it hid losses -- make it unlikely that Global Crossing will get many offers.

"Think about it. Teleglobe filed for bankruptcy, Global Crossing's in bankruptcy, WorldCom is on the edge. Why would somebody want to bid on these assets right now when you don't even know what the structure of the industry will be in three weeks?" said Vik Grover, an analyst with Kaufman Bros. in New York.

"Anybody could benefit from buying the assets, but I'm skeptical that anybody submits a bid that's worth anything," Grover added.

Instead, he said Global Crossing will likely have to push on with its plan to stay independent and hope to raise money by selling off some of its non-core businesses.

"The WorldCom situation has really screwed things up," said Pat Comack, an analyst with Guzman & Co who tracks the telecoms sector. "It's the worst time to be selling assets right now."

Global Crossing filed in January for the fourth largest U.S. bankruptcy ever, buckling under $12.4 billion in debt that it could not repay amid a glut of high-speed network capacity and falling prices for the spare capacity it sells to other telecommunications operators. It also faces two federal probes into its accounting.

But despite Global Crossing's claims that there are more than 60 companies vying to buy its assets, so far only one group -- Hutchison Whampoa Ltd. (HKSE:0013.HK - News) of Hong Kong and its partner, state-owned Singapore Technologies Telemedia Pte. -- has made an offer. And those talks fell through in May after Global Crossing failed to reach an agreement on price.

EYING WORLDCOM

Even so, Global Crossing has said there are still plenty of other interested parties and it expects a competitive bidding process once all the offers are on the table tomorrow.

The suitors range from established telecom carriers such as AT&T Corp.(NYSE:T - News) and Verizon Communications (NYSE:VZ - News) to buy-out firms such as Gores Technology Group and Platinum Equity.

And money losing Level 3 Communications(NasdaqNM:LVLT - News) -- which this week received $500 million in fresh funding from investors including billionaire Warren Buffett -- has also been named as a possible contender.

But so far, none has showed their hand and it could be that many are now more interested in WorldCom's assets, should they become available, analysts said.

"I'm sure the guys at Verizon are now wondering if the WorldCom assets will be for sale. If that's the case, I'm sure they'd much rather go for those," Comack said. Kaufman Bros.' Grover said a bid from AT&T or British Telecommunications (London:BT.L - News) would make sense, given that the two dissolved their joint venture, Concert, and now both lack global networks.

He also said a buy-out offer from Platinum Equity would be a good fit for Global Crossing, as Platinum already has its own voice and data services company with over 400,000 customers but it badly needs a network. It's also possible for Hutchison and Singapore Technologies to still submit their bid.

GOING IT ALONE

But the most likely outcome is that Global Crossing will end up going it alone, Grover added.

"I think it's in the best interests of the bondholders, and frankly probably the customers too, if Global Crossing reorganizes on its own," he said.

"They'll come out of bankruptcy and turn free cash flow positive and then somebody might buy them because it will be accretive to their numbers," Grover said.

Global Crossing has said it would be possible for the company to remain as an independent organization with as little as $500 million from outside investors -- either a single company or a consortium of investors.

As part of that plan, Legere said Global Crossing was willing to sell some or all of its non-core businesses. These include Global Marine Systems, which provides submarine fiber-optic cable installation and maintenance services, as well as its conferencing unit and network operations in the United Kingdom.

The company's Chief Executive John Legere told Reuters last month there were several telecoms operators and financial companies interested in being part of that consortium, although the company has not provided any further details.

Whatever happens, Global Crossing must submit its reorganization plan by Thursday.

If there are a number of bids, an auction for Global Crossing's assets will be held on July 24. The final hearing at the U.S bankruptcy court in Manhattan will be held on July 30.



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