Global Execs Offer a Plan to Save Firm

Buoyed by its improved financial performance, Global Crossing Ltd. said Tuesday that it will propose a bankruptcy reorganization plan that would revive the company without selling it.

The announcement came just days after two key bidders for the telecommunications company balked at substantially raising their initial bid of $750 million for a 79% ownership stake. Other bidders are expected to file offers by a June 20 deadline, with an auction set for early July.

John Legere, Global Crossing’s chief executive, said the company’s creditors will consider the stand-alone proposal from Global Crossing executives. Under that plan, the company’s reemergence from bankruptcy would be funded by a small equity investment and the proceeds from the expected sale of three operations.

After cutting thousands of jobs and shuttering 217 offices, Global Crossing is conserving cash and operating on a tight budget. The measures have reduced operating costs to about $900 million this year, down from $1.6 billion last year.

In addition, revenue has held up amid terrible market conditions, and the company’s cash balance is just $52 million lower than at the end of January--despite severance and other extra costs.

Legere said those factors helped make the executive proposal possible. “We have strong support and interest in this,” he said. “The math is just much different than it was on Jan. 28,” when the company filed for bankruptcy protection.

Legere said he expects the stand-alone proposal to be a group effort, with potential support and investment from bidders only interested in parts of the business or from equipment suppliers such as Lucent Technologies, which have an interest in selling goods to the surviving entity.

Further details of the plan will be filed June 20, along with buyout bids from other interested investors.

Global Crossing, based in Bermuda, filed for bankruptcy protection listing more than $12 billion in debt and $22.4 billion in assets--the nation’s fourth-largest bankruptcy filing. The company’s most recent operations report listed total assets of $15.9 billion.

The company spent billions of dollars building a worldwide fiber-optic network linking more than 200 cities in 27 countries. It was ultimately forced into bankruptcy by its staggering debt and falling revenue.

Over the weekend, talks with suitors Hutchison Whampoa Ltd. and Singapore Technologies Telemedia broke down when the creditors committee rejected the firms’ offer to sweeten their $750-million bid by giving creditors half of the proceeds from the expected sale of Global Marine Systems.

Global Marine, a Global Crossing subsidiary, maintains and repairs undersea fiber-optic cables. It has been on the block for more than six months.

Recently, Global Crossing said it also will sell its conferencing business and its terrestrial network in Britain to raise funds.

Attorneys for the unsecured creditors said the Hutchison-ST Telemedia offer was insufficient. Had a deal been struck, the Asian firms’ bid would have set the minimum offer for rival bids and allowed the companies to collect a $30-million “breakup” fee if their bid was superseded.

“Looking ahead, the stand-alone plan is an option receiving serious consideration against which any proposals for a sale of the entire company will have to be measured,” said Russell Belinsky of Chanin Capital Partners, financial advisors to the creditors’ committee.

The executives’ proposal may raise conflict-of-interest concerns from potential bidders that have to rely on the cooperation and candor of Global Crossing managers while weighing their bidding strategy, said Nicholas Kajon, a partner at Salomon Green & Ostrow, a bankruptcy firm not involved in the Global Crossing case. With the bankruptcy judge’s oversight, he said, “there should be no shenanigans.”

If a good bid comes along, Kajon said, creditors surely will take it instead of the managers’ plan. “It’s the old ‘bird in the hand’ theory, and it’s a good one.”

Meanwhile, Asia Global Crossing, more than 58% owned by Global Crossing, is busily rounding up its own suitors, among them China Netcom Communication Group Corp., Hutchison, ST Telemedia and Citic Pacific Ltd.