Hutch, STT buy Global Crossing stake


Global Crossing CEO John Legere announced the deal to sell the company's assets to the Asian firms on Friday

Staff and wire reports

NEW YORK, NY (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 and gives Hong Kong conglomerate Hutchison and state-owned STT control of a network that links 200 cities in 27 countries.

Under the deal, the two Asian companies will invest $250 million cash in return for a 61.5 percent stake in Global Crossing once it emerges from bankruptcy.

They will hold equal stakes in the firm, with the chairman likely to come from STT and Hutchison's managing director Canning Fok expected to be chairman of the executive board.

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.

No need to inject more cash

Fok told reporters in Hong Kong that the company does not need to inject more money into Global Crossing, which he said had $750 million in cash.

"It's not envisaged in our business plan. They have enough cash flow generated within the company," said Fok on Monday.

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.

Fok added that it was too early to talk about plans for Asia Global Crossing.

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


Under the terms of the deal, billionaire Li Ka-Shing's Hutchison Whampoa and STT will get 61.5 percent of the carrier

As a result of the sale, the company has canceled an auction scheduled for August 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.

Worth less than earlier deal

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.

Shares in Hutchison Whampoa were down 1.93 percent on the news. Hong Kong's Hang Seng Index dipped below the 10,000-point barrier on Monday, down 0.54 percent to 9959.92.