Global Shareholders File Own Plan
A group of Global Crossing Ltd. shareholders, upset that they have been left out of a proposal to revive the telecommunications network company, intends to file an alternative rescue plan today that would keep investors in the firm and kick out many top executives.
The unusual bid from the group, led by the Coburn & Meredith investment firm in Hartford, Conn., would raise about $1 billion through the sale of warrants, sources familiar with the bid said.
Lawyers must persuade the Bankruptcy Court in Manhattan that sufficient demand exists for the warrants, which guarantee holders the right to buy Global Crossing shares at a set price in the future.
Coburn & Meredith faces a quiet period until the filing, but a grass-roots collection of individual investors joining the effort made it clear that the company’s pending plan to sell a 79% stake in the company for $750 million is unacceptable. Creditors would jointly own 21% and receive $300 million in return for forgiving about $12.4 billion of debt. Current shareholders would get nothing.
Global Crossing has $22.4 billion worth of assets, made up mainly of the world’s biggest network of undersea and terrestrial fiber-optic cable for high-speed transmission.
“This is a public company. They have no right to treat us like a personal piggy bank. The shareholders own the company, although [Chairman] Gary Winnick may act like he owns it,” said Jay Province of Charlottesville, Va. The 44-year-old Web developer said he invested $25,000 in Global Crossing in September as part of a plan to save for his two children’s university education.
Global Crossing spokesman John Schmidt said the company is not aware of the shareholders’ efforts but is obligated to consider other offers.
Indeed, the company itself has a motion pending to allow it to negotiate with potential bidders that might bring in more than the existing joint offer from Singapore Technologies Telemedia and Hutchison Whampoa, one of Hong Kong’s biggest companies. Several sources familiar with the bankruptcy filing say other bidders already have surfaced.
But Global’s motion asks that any bids be at least $60 million more than the existing offer to cover a $40-million break-up fee and other costs associated with arranging the current deal, said John Biedermann, a New York lawyer whose firm is the proposed counsel for the committee of unsecured creditors.
Bankruptcy Court Judge Robert E. Gerber, who is presiding over the nation’s fourth-largest bankruptcy, will hear the company’s motion March 7.
The shareholders’ bid is extremely unusual, according to several independent experts. They doubted the plan would succeed, saying bankruptcy law favors a company and its creditors and that few investors are likely to bet more money on Global Crossing.
“This company is very far gone. I don’t see any ability to raise equity capital,” said Harry DeAngelo, professor of finance at the University of Southern California’s Marshall School of Business.
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Times staff writer James S. Granelli and Associated Press contributed to this report.
