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Carl Icahn Makes Bid for Global Crossing

The financier's firm says its offer for the troubled fiber optic network firm is worth $700 million.

May 31, 2003|James F. Peltz | Times Staff Writer

Billionaire buyout artist Carl Icahn made a bid Friday for one of the battered telecommunications sector's biggest casualties: Global Crossing Ltd.

XO Communications Inc., which emerged from bankruptcy proceedings in January after Icahn acquired control, said it offered $700 million for the fiber optic network provider, whose lavish former offices in Beverly Hills epitomized the excesses of the technology boom.

The offer, which includes $250 million in cash along with securities, tops a rival offer by Singapore Technologies Telemedia Ltd., XO contended. The Singapore-owned company has agreed to pay $250 million for a 61.5% controlling stake in Global Crossing.

In a telephone interview, Icahn said his firm was contacted by a representative of one of the Global Crossing creditors who was seeking a counteroffer.

The bids would be subject to approval of the U.S. Bankruptcy Court judge in New York overseeing Global Crossing's reorganization.

IDT Corp., a long-distance carrier based in Newark, N.J., also has expressed interest in buying the company. IDT and others have raised questions about whether a foreign-based company should be able to gain control of Global Crossing's vast network, because it carries sensitive U.S. data.

A Singapore Technologies spokeswoman declined to comment on the XO offer, saying only, "We have an agreement with Global Crossing that the court has approved." A Global Crossing spokeswoman said the company had no immediate comment on the bid.

Although Global Crossing was based in Bermuda, its nerve center was its Beverly Hills complex, where founder Gary Winnick worked out of a replica of the Oval Office.

Amid expectations of surging demand for fiber optic networks, Global Crossing spent four years and billions of dollars laying cable across 100,000 miles and several continents.

But just as it completed the project, demand from telecom companies for capacity on the network -- or bandwidth -- slowed sharply, crippling Global Crossing.

Straining under $12 billion in debt, Global Crossing filed under Chapter 11 of the U.S. Bankruptcy Code in January 2002. Winnick resigned as co-chairman late last year. The company moved its offices to New Jersey.

Icahn said that he would merge Global Crossing with XO, a Reston, Va., provider of phone and Internet services to businesses, and that the companies would fit well together.

"We don't have a long-lines carrier; we have to use other companies" to carry voice and data traffic over long distances, he said.

Icahn, 67, is a New York financier who gained fame in the 1980s as a corporate raider. Known also as a classic value investor -- or, to some, a "vulture" investor -- he has been stepping into the telecom sector to acquire distressed properties.

Icahn won control of XO last year after buying about $500 million in bank debt owed by the company.

His Global Crossing offer, in addition to cash, includes $200 million in newly issued notes backed by Global Crossing's assets, $200 million in preferred stock in Global Crossing after it exits Chapter 11 and 15 million warrants to acquire shares of XO at $10 a share.

Bloomberg News was used in compiling this report.

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