Several of the following articles
about Global Crossing were posted on the ExecutiveCaliber website over a period of a couple years.
They provide a good memory refresher but do notice that Mr.
Taylor was in the Lease Training business. That
becomes relevant when you begin to compare the Global
Crossing story with the railroads and Credit Mobilier. At
the bottom, there are several other articles about Global
Crossing from different sources.
ExecutiveCaliber (Lease Training by Jeffrey Taylor)
Copyright (c) 2001-2002 All rights reserved
Global Crossing
Global
Crossing, a telecommunications company, filed for Chapter
11, making it the biggest telecom flameout. Ranked by
assets, Global's bankruptcy is the nation's fourth largest
after Enron and Texaco.
If Global Crossing emerges from bankruptcy proceedings,
investors could get shares in the reorganized company, or
they could get nothing.
Morgan, their lead bank, stands to lose billions of dollars
because they commonly accepted shares in Global Crossing
subsidiaries as collateral for some of their loans.
The Bermuda company hopes to reorganize behind a $750
million investment from two Asian technology companies,
Hutchison Whampoa and Singapore Technologies (commonly
referred to as SingTel).
The two have signed a preliminary letter of intent to take a
60% interest in the reorganized company, putting the equity
value of Global at $1.25 billion, a sharp contrast with
Global Crossing's peak market capitalization of
approximately $48 billion in 2000. The deal will essentially
get Hutchison and Singapore Technologies the undersea cable
network that cost Global Crossing more than $10 billion to
build.
By swooping in on debt-strapped Global Crossing, Hutchinson
Whampoa may be picking up another undervalued asset at a
cheap price. That is because they have a $400 million
convertible-bond holding in the ailing fiber-optic carrier.
Hutchison's convertible-bond holding in Global Crossing is
virtually worthless today. But by putting fresh capital into
Global Crossing, paring down its $12.4 billion debt load and
positioning it for an expected revival in demand for
broadband services, Hutchinson stands a chance to eventually
double or triple the firm's $375 million investment.
Global Crossing once was considered the strongest of the
challengers to AT&T and the Baby Bells who were slow in
providing bandwidth to their corporate customers. The
company took on billions in debt to build an undersea
fiber-optic cable system that now represents 20% of all
undersea capacity leaving the U.S.
Telecom executives and analysts say a number of factors,
ranging from aggressive accounting to a "turnstile" of chief
executives (Global Crossing had five CEOs since its founding
in 1997) contributed to the company's fall.
Some analysts and investors say that Global Crossing sold
capacity on its fiber-optic network and then accounted for
the sales in a legal but aggressive way. The methodology was
common practice throughout the telecommunications industry,
and helped to fuel a run-up in stock prices through March
2000.
Back in 1997, investors reasoned that Internet-driven
telecom demand would grow exponentially, and companies such
as Global Crossing would do the lucrative work of laying the
"pipes" over which data were sent.
The thrust of Global Crossing's original business plan was
to sell capacity on its 27-country telecom network to other
carriers, offering them 20-year contracts in what is known
as an indefeasible right of use.
These contracts were attractive to upstart telecom firms
such as Global Crossing because they could book most of the
20-year revenue upfront as one lump sum. At the same time,
Global Crossing would offer to buy similar capacity in
another area from the same carrier but book those costs as a
capital expense, allowing it to show large revenue increases
with little or no operating expenses.
A capacity glut complicated the picture. Carriers found they
didn't need to lock in long-term price breaks because prices
were already falling as much as 50% on a year-to-year basis.
Global Crossing's accounting practices are drawing more
interest in the wake of Enron's accounting scandal. AA,
which audited Enron's books, also audited Global Crossing
and a number of other emerging telecom carriers, including
Qwest and Level 3.
Some critics say that Global's true failing was that the
company was run more as a financial and deal-making entity,
and less as a telecom outfit.
Dozens of banks, led by Morgan, which lent a total of $2.25
billion to Global Crossing against shares in Global's
subsidiaries, are playing a prominent role in the
dissolution of the company.
Bondholders, owed some $4.4 billion, have split themselves
into two groups -- depending on whether their bonds were
issued by the parent or by its Frontier subsidiary.
A third group are the trade creditors, who are owed about
$1.1 billion for the equipment and services they provided
the telecom company. Three sit on the creditors committee:
Lucent, Verizon, and Alcatel.
One of the main problems for everyone is that there doesn't
seem to be much to fight over.
Global Crossing listed assets of $22.4 billion and
liabilities of $12 billion when it filed Jan. 28. The only
firm offer on the table to take over Global Crossing's
operations came from Hutchinson Whampoa of Hong Kong, a unit
of Singapore Technologies.
All these groups must basically decide whether they can
recover more in liquidation or through a restructuring.
The banks find themselves in a difficult position because
many of Global Crossing's assets lie offshore, making it
difficult for the banks to legally enforce a claim on them.
In addition, Global Crossing raised the money at a time when
even companies that didn't have investment grade ratings
could borrow without posting collateral.
Global Crossing
Originally published April 4, 2002
Updated August 8, 2002
Excerpt:
...Global
Crossing's accounting practices drew more interest in the
wake of Enron's accounting scandal. AA, which audited
Enron's books, also audited Global Crossing and a number of
other emerging telecom carriers, including Qwest and Level
3.
Some critics say that Global's true failing was that the
company was run more as a financial and deal-making entity,
and less as a telecom outfit.
Lease Training Services: Global Crossing
Excerpts:
...Global Crossing's Chapter
11 filing had made it the biggest telecom flameout. Ranked by assets, Global's
bankruptcy was the nation's fourth largest after Enron and Texaco.
The deal will essentially get Hutchison and Singapore Technologies the undersea
cable network that cost Global Crossing more than $10 billion to build.
The deal will essentially
get Hutchison and Singapore Technologies the undersea cable network that cost
Global Crossing more than $10 billion to build.
By swooping in on debt-strapped Global Crossing, Hutchinson Whampoa picks up
another undervalued asset at a cheap price. That is because they have a $400
million convertible-bond holding in the ailing fiber-optic carrier.
Global Crossing once was considered the strongest of the challengers to AT&T and
the Baby Bells who were slow in providing bandwidth to their corporate
customers. The company took on billions in debt to build an undersea fiber-optic
cable system that now represents 20% of all undersea capacity leaving the U.S.
Telecom executives and analysts say a number of factors, ranging from aggressive
accounting to a "turnstile" of chief executives (Global Crossing had five CEOs
since its founding in 1997) contributed to the company's fall.
Some analysts and investors say that Global Crossing sold capacity on its
fiber-optic network and then accounted for the sales in a legal but aggressive
way. The methodology was common practice throughout the telecommunications
industry, and helped to fuel a run-up in stock prices through March 2000.
Back in 1997, investors reasoned that Internet-driven telecom demand would grow
exponentially, and companies such as Global Crossing would do the lucrative work
of laying the "pipes" over which data were sent.
Global Crossing's accounting practices drew more interest in the wake of Enron's
accounting scandal. AA, which audited Enron's books, also audited Global
Crossing and a number of other emerging telecom carriers, including Qwest and
Level 3.
Global Crossing Tied to
Clinton Defense Secretary
Wes
Vernon, NewsMax.com
Saturday, Feb. 16, 2002
WASHINGTON - A top Clinton
administration official, former Defense Secretary William Cohen, sits on the
board of Global Crossing. This is the telecom giant that went belly up on
Jan. 28 in the fourth largest bankruptcy in U.S. history, leaving a trail of
inflated revenues, top executives enriching themselves, employees and
shareholders holding the bag, and Arthur Andersen acting as both consultant and
auditor.
Perle: 'Prince of Darkness' in the spotlight
Asia Times
Jim Lobe
It's still too early
to tell, but
analysts are raising
eyebrows over news
that Richard Perle,
the single most
powerful hawk
outside the
administration, has
been retained by
Global Crossing to
help ensure that
Hutchison Whampoa,
widely regarded by
his fellow hawks as
a front for China's
People's Liberation
Army, can buy a
majority share in
the bankrupt
telecommunications
company.
It's the latest in a
series of
revelations of
Perle's business
dealings that, at
the very least, make
clear why he decided
against taking an
official position in
the administration
of President George
W Bush. It seems
that Perle, for all
his hawkishness,
wants to get rich in
ways that government
service may not
permit.
The Enterprising
Hawk: Richard
Perle Flies the Coop
Counterpunch
Jason Leopold
Richard Perle’s
resignation Thursday
as chairman of the
Defense Policy
Board, a Pentagon
advisory group, is
long overdue. Perle
quit the board
because he was hired
to help bankrupt
telecommunications
firm Global Crossing
win approval from
the Department of
Defense to sell the
company to a Hong
Kong billionaire and
lawmakers questioned
whether Perle’s dual
roles was a
conflict-of-interest.
Presumably, Global
Crossing hired Perle,
who served as
assistant secretary
of defense under
former President
Ronald Reagan, as a
lobbyist because he
wields an enormous
amount of power
around the Pentagon
and would likely get
the job done. Perle
is a key adviser to
Secretary of Defense
Donald Rumsfeld and
a leading architect
in the Bush
administration’s
policies toward
Iraq.
The Pentagon and the Federal Bureau of
Investigation objected to Global Crossing’s sale to Asian investors last year
because the government uses Global Crossing’s fiber optics networks and a sale
would put the networks under control of the Chinese government. Global Crossing
said it would pay Perle $125,000 and an additional $600,000 if the deal went
through.
Hutchison Whampoa Snags Global
Crossing
pdf
for Chinese Army link just in case
Hutchison Whampoa, the mammoth
company that runs the Panama Canal and has
close
ties to the Chinese army, as a new rhinestone in its crown: Global Crossing.
Along with another Asian company,
Singapore Technologies, it paid $250 million today for the bankrupt fiber-optic
network company - a third of the original offer.
"An outside financial advisor to
Global Crossing who was called to testify at a hastily scheduled hearing early
Friday said only three credible bids had been received during a lengthy auction
process and that bidders were spooked by the ongoing collapse of the business,"
the Associated Press reported.
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