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Global files for bankruptcy
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January 28, 2002: 2:23 p.m. ET
Fiber-optic network operator files for protection, gets $750M investment.
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NEW YORK (CNN/Money) - Fiber-optic network operator Global Crossing Inc. filed for bankruptcy court protection Monday but vowed to continue normal operations during the restructuring.
The company filed for protection in bankruptcy court in New York as well as Bermuda, where its headquarters are located. The company also announced a proposed $750 million investment from two major Asian telecommunications companies -- Hutchison Whampoa Limited and Singapore Technologies Telemedia Pte. Ltd. The company's statement said the restructuring under bankruptcy protection was part of the terms of that proposed investment.
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Global Crossing CEO John Legere says "it's business as usual" for customers and his employees.
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Under the company's plans creditors would share in a combination of cash, new debt, and new equity in the restructured company. Existing shareholders would not participate in the company's new ownership structure under the plan.
There could be other bidders for a stake in the company as part of the bankruptcy proceedings, Global Crossing CEO John Legere told CNNfn's Market Call Monday.
"We're going to work continuously to drive the letter of intent to definitive agreement," he said. "As part of the proceeding process, other bids will have to be entertained if they do come forward."
Hutchinson Whampoa already has a joint venture with Global Crossing in Asia. Singapore Technologies, an arm of the Singapore government, owns the second phone carrier there.
"These two companies are not only well funded, but they're very strategic in the telecom space and a critical part of the world in Asia," he said.
The company cut about 3,200 jobs during the fourth quarter, but no further layoffs are planned as part of Monday's filing.
"Ours is a balance sheet issue, not an operational one and today's actions are intended to directly address this issue," said a statement from Legere. "This investment, along with the financial and operational restructuring that we're implementing, will strengthen our balance sheet and enable Global Crossing to build a sustainable business on its existing unmatched global network."
Global Crossing is one of a number of telecommunications and telecom vendors who have been hurt by the slower-than-forecasted growth in demand for telecom services. In late December it announced it obtained a waiver from its leading lenders, led by J.P. Morgan Chase & Co. (JPM: down $0.98 to $34.01, Research, Estimates) and Citibank, a unit of Citigroup Inc. (C: down $0.65 to $48.97, Research, Estimates) for potential violations of a credit agreement covering $2.25 billion in borrowing. That waiver was good through the middle of next month.
The company has yet to release fourth-quarter results. Analysts surveyed by First Call expect that the company's loss excluding special items rose to 91 cents a share from 70 cents a share a year earlier, and project that 2002 losses will rise to $3.14 a share from $2.99 a share projected for 2001.
Legere insisted the company's fiber optic network connecting major cities is its key asset, not its well-known underseas fiber optic cable which has not seen demand live up to expectations.
"There is some supply and demand issue in components of the sub-sea space," he said. "We happen to be the only remaining viable global wholesale player because everyone is moving away from that business."
The company said that customers will not notice any change in service and that employees would see their pay and benefits continue without interruption.
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The company has seen its shares steadily decline from a high of $61.06 a share, and a market capitalization of $47.6 billion in February 2000. Its market capitalization before Monday's filing stood at only $273 million. Its filing listed assets of $25.5 billion and liabilities of $14.6 billion. Reuters reported that the company is the fourth largest bankruptcy case in the country's history.
The New York Stock Exchange suspended trading in shares of Global Crossing (GX: Research, Estimates) after the bankruptcy filing announcement without the stock opening for trading Monday. Shares lost 3 cents to 51 cents in Friday trading. 
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