L.A. Businessman May Bid for Global

In a telecom industry clogged with familiar names, little-known Los Angeles financier Tom T. Gores is emerging as a strong candidate to buy the core fiber-optic network business of Global Crossing Ltd.--if the process doesn’t wear him out first.

Gores’ Platinum Equity, a private buyout firm that has picked up some big chunks of the telecommunication sector already, has the cash, the solid balance sheet and the incentive to grab the bulk of Global Crossing’s business, said people familiar with the bidding process. Potential buyers are scheduled to turn in offers by July 11, and the company can then start negotiations to bring Global out of the nation’s fourth-largest bankruptcy.

More important, Gores has what other telecoms drool over: customers to fill largely empty cable pipelines.

NextiraOne, Platinum’s data and voice services company, has 400,000 customers, and if Gores could offer deals to entice just a quarter of them to change their long-distance carrier, he would more than double Global Crossing’s 85,000 customers.

“If you could plug Nextira into Global Crossing, you’d have a grand slam,” said analyst Vik Grover of Kaufman Bros. in New York. “That deal would be a great one.”

Global Crossing’s reach across the Atlantic and Pacific oceans, connecting 27 countries and plugging into skyscrapers in major cities such as Hong Kong, appears to be a natural fit for Nextira.

“Nextira is the faucet, and Global Crossing is the plumbing,” Gores said.

He would not discuss bidding details because of a confidentiality agreement bidders signed before the process began, and cautioned that Platinum, known to be interested in Global, had not decided yet whether it would make a bid.

Nextira designs, implements and maintains telecommunications systems for mid-size and major corporations in 17 European countries, Canada, Mexico and the United States. It figures out telephone, computer and other communications needs of its customers--including IBM Corp., Merrill Lynch & Co. and Johnson & Johnson--then it buys the equipment, installs it and keeps the systems working and up to date.

It is focused on customer services, and that is essentially where the industry is heading after spending more than $444 billion in six years to build out networks worldwide. Indeed, said one telecom executive, Internet and business services are the only parts of telecom doing well.

Platinum also stands ready to operate firms for years, if necessary. Gores even calls Platinum a mergers, acquisitions and operations company. It goes into deals to enter markets, not to exit quickly with a profit, he said.

“One question I always have is whether you can live with the business if you can’t exit it for two or three years,” Gores said. “If you can’t, don’t buy it.”

To be sure, there are other bidders for all or parts of Global Crossing’s network, and Global’s chief executive, John Legere, has said management will put together a plan to bring the company out of bankruptcy protection as an independent concern.

At one point, Legere said more than 60 companies were interested in Global Crossing’s assets, but fewer than 10 are expected to file secret bids next week. “And only two or three will be meaningful ones,” said analyst Alex Mou at Hotovec, Pomeranz & Co. in San Francisco.

Although potential buyers are double-checking numbers in the wake of the accounting fiasco disclosed last week at WorldCom Inc., they are more antsy about bidding for Global Crossing’s assets for other reasons, analysts said. The industry suffers from continued slack demand and too much bandwidth, and any healthy buyers remaining might be looking at the prospect of more assets going up for sale at troubled companies such as WorldCom, Qwest Communications International Inc. and others teetering on the brink of bankruptcy.

Even AT&T; Corp., a stalwart among long-distance companies, could shy away from taking a slice of Global Crossing, mainly because it has its own worldwide network and because it already carries a hefty load of debt.

The more healthy Baby Bells, local service carriers such as Verizon Communications Inc. and PacBell parent SBC Communications Inc., also are thinking twice about giving up their monopolies to enter the stagnant long-distance market, analysts said.

The situation gives Gores a big door to enter into the bidding process. But he’ll need more than the $750 million for 79% of Global Crossing that two Asian firms initially offered. Hong Kong-based Hutchison Whampoa Ltd. and Singapore Technologies Telemedia recently backed out, however, when bondholders indicated they would reject such a bid.

Gores, or any bidder for the company, would have to come up with more cash and take less of a majority stake to satisfy creditors, who are owed $12.4 billion and are being left with pennies on the dollar and a minority stake in the new company.

Gores probably could do it alone. Platinum generates more than $4 billion in revenue from a portfolio of 24 companies, and about $2.5 billion of that comes from NextiraOne, an amalgamation of units from Williams Communications Group Inc., Alcatel and other businesses.

But Global Crossing’s sales would have to justify any bid, and Platinum may go right up to next week’s deadline before deciding how much to bid or whether it’s even worth it. The hurdles include setting values on assets, such as contracts for capacity on cable systems owned by other telecoms that are in financial trouble.

Gores also could get help from his older brother, Alec, who operates Gores Technology Group, a Los Angeles investment firm also bidding for Global Crossing’s assets. Though the brothers are close, they often compete for the same distressed properties and unwanted units of larger firms. But industry watchers said the brothers might join in the effort to buy Global.

Even so, Tom Gores isn’t hedging all his bets on buying Global Crossing. He said he had $1 billion worth of other deals in the works and could buy or join with partners such as AT&T; to give Nextira much of what it would get with Global.

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