Hutch, STT buy Global Crossing stake

Staff and wire reports

NEW YORK (CNN/Money) -- Global Crossing Ltd. has agreed to sell a majority stake in its fiber-optic network to Hutchison Whampoa and Singapore Technologies Telemedia for $250 million in cash.

The agreement sets the stage for the phone company to emerge from bankruptcy protection.

Under the deal, Hutchison Whampoa and STT will invest $250 million cash in return for a 61.5 percent stake in Global Crossing once it emerges from bankruptcy.

Separately, Global Crossing will give $300 million cash and issue $200 million in new debt to its banks and creditors, a spokeswoman told CNN/Money.

Global Crossing's banks and creditors will receive a 38.5 percent stake in the company, the spokeswoman said.

The agreement, which was approved Friday in the bankruptcy court for the Southern District of New York, includes Global Crossing's 58 percent stake in its Pacific Rim affiliate Asia Global Crossing Ltd., Joseph Ryan, an attorney for the creditors committee, said at the hearing.

The agreement also allows Global Crossing to retain its British national business, its conferencing division, and Global Marine – three businesses which it had previously considered selling in order to maximize its cash position.

Auction canceled

As a result of the sale, the company has cancelled an auction scheduled for Aug. 14.

Global Crossing, which filed for Chapter 11 protection in January, said it intends to file a reorganization plan in September and expects to emerge from bankruptcy in early 2003.

"With our turnaround well under way, and the support of strong new strategic partners, Global Crossing is poised to become the global leader providing networking services to enterprises and carrier customers in more than 200 of the world's top cities," CEO John Legere said.

The new deal is worth far less than the $750 million that Hutchison and STT originally offered for 79 percent of Global Crossing.

That deal fell apart in May because attorneys for Global Crossing's creditors said the offer was too low for a company with an estimated $22.4 billion in assets.

Madison, N.J.-based Global Crossing collapsed under $12.4 billion in debt, falling prices, and a glut of high-speed network capacity that it couldn't sell.

The company also faces investigations into its accounting practices by the U.S. Justice Department, the Securities and Exchange Commission and Congress.