Global Crossing Ltd., the operator of an international high-speed network with a presence in 27 countries and more than 200 major cities around the world, announced on Monday that it is seeking Chapter-11 bankruptcy protection, and that two business partners will take a new majority stake in the company as it restructures its balance sheet.
Hong-Kong based Hutchison Whampoa, and Singapore Technologies, who have existing investments in Global Crossing subsidiaries, will jointly make a $750 million cash investment in the struggling company, based in Hamilton, Bermuda, and receive a share of the companys cash, equity and debt. A Global Crossing spokesperson said details on how much each investor is chipping in to Global Crossing is not part of it bankruptcy filings and not available at this time.
Hutchison Whampoa already owns 50 percent of Hutchison Global Crossing, a Hong Kong-based Global Crossing subsidiary that provides fixed-line, Internet and data services. A subsidiary of Singapore Technologies Telemedia owns 50 percent of StarHub Crossing, a Singapore-based Global Crossing subsidiary that owns and operates a high-capacity backhaul network.
Global Crossing and some affiliates have filed Chapter 11 cases in the U.S. Bankruptcy Court for the Southern District of New York and related papers in the Supreme Court of Bermuda. The new arrangement is contingent upon confirmation by the courts before the end of August 2002.
Existing common and preferred shareholders will lose their stakes in the company.
"Ours is a balance sheet issue, not an operational one, and todays actions are intended to directly address this issue," John Legere, Global Crossings CEO said in prepared statement. "Even with the financial uncertainty weve recently experienced, customers have continued to choose our network over many others. With this restructuring, well 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 company said that there will be no tangible interruption of operations. Employees will continue to be paid and customers will not see their service affected.
Global Crossing has battled the continuing downturn in the telecommunications sector, struggling with debts incurred in building out its global network. It has seen its stock plummet from $23.75 nearly one year ago to 51 cents. Trading in Global Crossing stock was suspended by the New York Stock Exchange on Monday at 30 cents after news of the bankruptcy filing.