More convertible bond. Jeff
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DCR RATES GLOBAL CROSSING'S CONVERTIBLE PREFERRED STOCK OFFERING 'BB+'
PR NEWSWIRE - October 29, 1999 17:32
CHICAGO, Oct 29, 1999 /PRNewswire via COMTEX/ -- Duff & Phelps Credit Rating Co. (DCR) has assigned a 'BB+' (Double-B-Plus) rating to Global Crossing Holding Ltd's (Global Crossing) offering of $1 billion aggregate liquidation preference of 6.375 percent cumulative convertible preferred stock. The preferred stock will be convertible into common stock of Global Crossing, Ltd based upon a conversion price of $45 per share. The proceeds from the offering are expected to be used for general corporate purposes including its acquisition of RACAL Telecom (RACAL). DCR placed the ratings of Global Crossing on Rating Watch-Down on October 15, 1999 following its announcement to acquire RACAL for $1.65 billion in cash.
This convertible preferred stock issuance will in part resolve some of the rating watch concern associated with Global Crossing. The company was placed on rating watch pending information concerning the pro forma financials and corporate structure for the RACAL acquisition. Global Crossing had announced that $500 million of the RACAL acquisition would be directly funded by Global Crossing Holdings. This issuance indicates that the $500 million funding for RACAL will be equity treated instead of debt. The remaining acquisition price will be funded in a manner non-recourse to Global Crossing. There is some concern that a material degree of implicit support will exist in this funding considering that Global Crossing has a 100 percent ownership position in RACAL. However, should the pro forma Global Crossing corporate structure place RACAL in a separate holding company or directly linked to Global Crossing Ltd, this will minimize the credit impact of this acquisition. Nevertheless, Global Crossing's convertible preferred issuance is viewed as a credit positive from a ratings perspective.
DCR's ratings of Global Crossing reflect the company's increasing revenue and cash flow diversity from normal, but highly variable sub-sea transport to a balance of high-growth sub-sea and data revenues, but also very stable local telephony revenues. Global Crossing's transport business should experience good growth due to the demand for international calling, increasing worldwide teledensity and capacity shortages on sub-sea cables. Frontier's telephony, Internet web hosting and wholesale data revenues continue to experience solid growth. The company's wholesale voice business has experienced competitive pressure. Highly competitive consumer-based revenues for the pro forma company are only approximately 4 percent. RACAL provides Global Crossing with important direct end-user access through its modern fiber-optic network in the UK.
DCR is a leading global rating agency with 33 local market offices providing ratings and research on debt issues and insurance claims paying ability in more than 50 countries. For additional research on Global Crossing visit DCR's Web site at dcrco.com. DCR's research is also available on Bloomberg at DCR<GO and First Call's BondCall Direct/Research Direct at firstcall.com, as well as through other third-party providers.
SOURCE Duff & Phelps Credit Rating Co. (C) 1999 PR Newswire. All rights reserved. prnewswire.com -0- CONTACT: Michael L. Weaver, 312-368-3156, weaver@dcrco.com, or Elizabeth
G. Henderson, 312-368-3218, henderson@dcrco.com, both of Duff & Phelps Credit Rating Co.
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