Pentagon Said to Oppose Global Crossing Deal

The Pentagon plans to oppose an agreement by Singapore Technologies Telemedia to buy a majority stake in Global Crossing Ltd., an official familiar with the situation said Tuesday.

Defense Department officials cited national security concerns in a memorandum to oppose the acquisition of the 61.5% stake by STT, which is owned by an arm of the Singapore government, said the official who asked not to be identified.

Global Crossing must win approval from a committee made up of national security and economic officials, and the Pentagon’s opposition could endanger completion of the deal.

“If the Defense Department is opposed, then that’s a real problem for getting the deal done,” said Paul Glenchur, an analyst at Schwab Capital Markets.

Global Crossing had to restructure the deal once before when STT’s former partner, Hong Kong-based Hutchison Whampoa Ltd., pulled out after U.S. officials raised national security concerns. Global Crossing could alter the structure of the deal again.

“With Global Crossing we continue to work with all the agencies and continue to be optimistic,” a spokeswoman for STT said.

A Global Crossing representative had no comment.

Global Crossing, the operator of a high-speed fiber-optic network in 27 countries, filed for bankruptcy protection in January 2002 after buckling under $12.4 billion of debt, a soft economy, steep competition and a glut of network capacity.

STT agreed to pay $250 million for the stake in the company, and the companies on June 20 filed a formal application for approval from the Committee on Foreign Investment, which reviews and must sign off on such deals with foreign entities.

If STT’s bid for the Global Crossing stake is shot down, that could open the doors for competing bids, and several carriers have expressed interest in getting their hands on the company’s global telecommunications network.

XO Communications, controlled by financier Carl Icahn, has been the most aggressive suitor, gobbling up Global Crossing’s debt and making an unsolicited takeover offer.

XO has won the backing of Global Crossing’s lenders, but the offers have been rebuffed by the company’s management and unsecured creditors.