Copyright 2002 / Los Angeles Times

Los Angeles Times…03/26/2002

From LexisNexis

A federal Bankruptcy Court ruling Monday set the stage for what could be a highly contested auction for telecommunications company Global Crossing Ltd. and its worldwide network of high-speed, fiber-optic cable.

The U.S. Bankruptcy Court for the Southern District of New York in Manhattan gave Hutchison Whampoa Ltd. of Hong Kong and Singapore Technologies Telemedia until May 21 to top their $750 million bid for Global Crossing. Other potential buyers have until June 20 to respond with rival offers.

Judge Robert Gerber said he was troubled by the bidding procedure in its original form but that a modified proposal addressed his concerns.

"The process must be fair and it must be a level playing field," Gerber told a packed courtroom as he approved a modified letter of intent for Hutchison — owned by tycoon Li Ka-shing, Hong Kong's richest man — and ST Telemedia to acquire Global Crossing.

Global Crossing, which also faces probes by the Securities and Exchange Commission and the FBI, has said more than 40 other companies are considering offers.

Bermuda-based Global Crossing filed for Chapter 11 bankruptcy protection in January. Representing debt of about $12.4 billion, the filing was the fourth-largest U.S. bankruptcy petition.

Gerber also ruled that Hutchison and ST Telemedia would be eligible for a breakup fee of $30 million — down from the original $40 million — but only if the firms increase their offer for Global Crossing; the offer is approved by the company, banks and creditors' committees; and the bid is ultimately topped by another bidder.

Under the original deal, the two companies would have received $40 million if the court turned down their current buyout proposal, a near-certain scenario because the offer has been widely criticized as inadequate and politically troublesome because of their ties to the Chinese government.

The judge approved the new breakup fee despite an objection from FleetBoston Financial Corp.'s Fleet National that the reduced figure was negotiated in secret. An attorney for Fleet, one of 91 banks trying to recover roughly $2.2 billion owed to them by Global Crossing, asked for another hearing on the matter, but the judge denied the request.

The new bidding procedures are more flexible and allow Global Crossing to pursue bids simultaneously for the entire company and for non-core parts of the business, such as the company's Global Marine cable installation and maintenance unit. In addition, Global Crossing can pursue talks with investors who may want to buy a piece of the reorganized company.

Gerber also approved a $5 million payment to the Hutchison group to cover costs for assembling the takeover proposal. The original motion had called for a $10 million fee. The judge rejected a request from a shareholder group for $2.5 million to cover the cost of formulating a bid on behalf of stockholders.

Gerber scheduled the auction for July 8, with results to be confirmed July 11.