Global to Slash More Jobs, Shut 71 Offices

Global Crossing Ltd. said Friday it will cut 1,600 more jobs, close 71 offices and lower some executives’ pay to further reduce expenses while the company is in bankruptcy.

Hamilton, Bermuda-based Global Crossing, which operates a worldwide fiber-optic communications network, also said it may sell its conferencing business and network system in the United Kingdom to raise additional cash.

The company still is seeking a buyer for its Global Marine unit, which installs and maintains undersea fiber-optic cables and was put up for sale late last year.

Global Crossing said the moves will slash operating expenses 40%, to about $900 million this year, excluding costs associated with Asia Global Crossing. Publicly traded Asia Global Crossing operates networks serving the Far East, is 59% owned by Global Crossing and is not in bankruptcy.

The new layoffs will hit hardest in Global Crossing’s administration and sales divisions and will cut the company’s payroll to fewer than 6,000 employees by the end of the month, down from about 15,000 at the beginning of 2001. Under a recently announced voluntary buyout, 754 employees left Global Crossing on Friday.

“They’re doing what they have to do to become a lean, functioning company, and that means doing a lot of cutting,” said Jeffrey Kagan, an Atlanta-based telecommunications consultant.

“Will they be able to emerge [from bankruptcy] as a fighter and a competitor or will they be acquired? That’s the big question, and we don’t know yet.”

So far, the company’s assets have attracted just two formal offers, one from a shareholder group and the other from two Singapore companies that have offered to invest $750 million for a 79% stake in the reorganized company.

Two Los Angeles-based turnaround firms, Gores Technology Group and Platinum Equity, plan to submit separate bids for Global Crossing next week. Another firm, investment company Texas Pacific Group, also may be preparing an offer, Bloomberg News reported Friday.

Global Crossing became the first company to build a worldwide network using private funds, but took on billions of dollars in debt. Ultimately, lagging sales and increased competition undercut Global Crossing’s ability to keep up with interest payments, and on Jan. 28, the company filed for Chapter 11 reorganization, becoming the nation’s fourth-largest bankruptcy in terms of assets.

Bondholders and creditors, owed at least $12 billion, want Global Crossing to preserve as much cash as possible in case the company is liquidated and its assets distributed among the various creditors. As of last month, Global Crossing said it had an estimated $700 million in available cash.

As part of the expense reductions, Global Crossing will cut capital spending to $200 million this year, down from $3.2 billion last year, when the company finished the bulk of its network construction.

The company said it will save an additional $150 million a year in lease payments by shuttering 71 offices.Global Crossing would not identify the offices to be closed or hit with layoffs. The company’s largest U.S. operations are in Rochester, N.Y.; Detroit; Denver and Madison, N.J. The company’s soon-to-be-vacated Beverly Hills office has been reduced to fewer than 100 employees through earlier layoffs.

Global Crossing Chief Executive John Legere also said he will take a 30% salary cut, to $770,000 annually, until the company emerges from bankruptcy. Global Crossing said other senior managers also will take a pay cut, but a spokesman said each executive “will make that decision based on his or her own situation.”

Legere’s compensation package has been widely criticized because it included a $3.5-million signing bonus and severance pay of up to $3 million when he left Asia Global Crossing to become CEO of the parent company. In addition, the companies forgave a personal loan of $15 million, canceling out the last $10 million just months before Global Crossing’s bankruptcy.

The new bidder, Texas Pacific, has $3.5 billion in assets and a history of reorganizing airlines. Its founder, David Bonderman, revived Continental Airlines Inc. when it was in bankruptcy proceedings and then sold the fifth-largest U.S. airline. Bonderman also invested in America West Holdings Corp. and is chairman of Ryanair Holdings.

Also on Friday, a spokesman for the House Energy and Commerce Committee said the panel plans to seek a wide range of documents from Global Crossing, whose accounting practices are under investigation by the FBI and Securities and Exchange Commission. The spokesman declined to elaborate.