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Global Crossing to Slash Value of Its Holdings

Telecom: The firm says a reassessment will show less than $5 billion in assets, down from $15.4 billion. The CEO says it is meeting some key financial goals.

September 05, 2002|JAMES S. GRANELLI | TIMES STAFF WRITER

With a deal pending to pull it out of bankruptcy, Global Crossing Ltd. said it would slash the value of its worldwide fiber-optic network and other assets by at least $10 billion, or two-thirds of their current listed value.

In a filing with the Bankruptcy Court in New York, the telecommunications firm said it is completing a detailed assessment of its holdings in light of a pending $250-million deal from two Asian companies.

The filing, part of a monthly report on finances, also revealed that Global Crossing's closely watched cash on hand fell by $106 million in July, the biggest one-month drop since March. The company did not explain the cause for the drop, which left it with $677 million at the end of the month.

But Chief Executive John Legere said in a statement that the company is meeting some key financial goals, such as lowering operating expenses. The goals, provided in March to creditors, have not been released publicly. The company lost $145 million, or 16 cents a share, in July, an improvement over June's loss of $173 million, or 19 cents. Sales were $249 million in July, $1 million less than in the previous month.

Global has said in filings that it expected to lower the value of its assets once it had a deal approved for the purchase of the company, but it had never put a dollar amount on the reduction.

When it filed its Chapter 11 petition in January, Global listed $22.4 billion in assets, which at the time ranked it as the fourth-largest bankruptcy case. But Global has since lowered that figure to $15.4 billion, and the major revaluation it is undergoing will cut it to less than $5 billion in assets.

Company executives would not elaborate on the monthly report, which was filed Friday night.

Last month, the court approved an agreement that Global and its creditors worked out with two Asian companies, Hutchison Whampoa Ltd. in Hong Kong and Singapore Technologies Telemedia Pte. Ltd.

Under the deal, the two firms would invest $250 million in cash for 61.5% of Global, and the company's creditors and bankers would get 38.5% of Global, about $300 million in cash and $200 million in notes.

The deal is expected to be the basis for a reorganization plan that Global expects to file with the court Sept. 16. Other creditors then can object or file their own plans to restructure the company.

Global's original filing listed debts of $12.4 billion, which included amounts owed by some subsidiaries that it did not put in bankruptcy. Its July report values the total bankruptcy claims at $7.8 billion for the company and 55 affiliates.

Last month, it put two dozen more subsidiaries into bankruptcy to make it easier to include them in the reorganization.

In the last few weeks, the company has filed a series of documents seeking court approval for tentative settlements with major equipment suppliers, such as Lucent Technologies Inc. Those documents were filed under seal, Global said, to keep the details from other vendors still negotiating deals.

The settlements probably will provide payments over time to avoid taking a chunk out of Global's remaining cash on hand.

Lucent, for instance, was owed $31.4 million at the time Global filed its Chapter 11 petition. Other major suppliers include Alcatel, which is owed $31.1 million, and TyCom Ltd., which is owed $29.2 million.

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Times staff writer Elizabeth Douglass contributed to this report.

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