Beijing, if things go as planned. La Ka-Shing is taking them over.
Global Crossing Deal Is Latest Gamble for Hong Kong's Li
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Turning Cheap Assets
Into Profits Is a Pattern
For Hutchison Boss
By Connie Ling
01/30/2002
The Wall Street Journal
Page A14
(Copyright (c) 2002, Dow Jones & Company, Inc.)
HONG KONG -- By swooping in on debt-strapped U.S. fiber-optic company Global Crossing
Ltd., Li Ka-shing may be picking up another undervalued asset at a cheap price. But
this time the Hong Kong property tycoon, known in local circles as "Superman" for his
ability to spot bargains and create wealth, may also be rescuing himself.
That's because Hutchison Whampoa Ltd., where Mr. Li is chairman, has a $400 million
convertible-bond holding in the ailing fiber-optic carrier, which on Monday filed for
Chapter 11 bankruptcy protection under the U.S. Bankruptcy Code. Hutchison bid $750
million jointly with Singapore Technologies Telemedia Pte. for a stake in Global
Crossing .
Hutchison's convertible-bond holding in Global Crossing is virtually worthless today.
But by putting fresh capital into Global Crossing , paring its $12.4 billion debt load
and positioning it for an expected revival in demand for broadband services, Mr. Li
stands a chance of eventually doubling or tripling his $375 million investment,
analysts say.
"This transaction is a good financial investment that can potentially offer some huge
capital gains," said Cusson Leung, an analyst with ING Baring Securities (H.K.) Ltd.
Hutchison's share price jumped 4.2% yesterday in Hong Kong to HK$75 (US$9.62) on the
news.
The deal will garner Hutchison and Singapore Technologies the undersea cable network
that cost Global Crossing more than US$10 billion to build. Ideally, Hutchison will be
able to sell it at a profit after Global Crossing 's restructuring, Mr. Leung said.
The rescue package, if approved by the U.S. bankruptcy court, will give Hutchison and
Singapore Technologies as much as 80% in the once highflying company.
Hutchison assumed the bond, which is convertible into preferred shares of Global
Crossing at a price of US$45, in January 2000 as part of its 50% stake in the two
companies' joint venture, Hutchison Global Crossing , according to Nora Yong, a
Hutchison spokeswoman. At that time, Global Crossing 's shares were trading at around
US$45. But the twin blows of the dot-com collapse, which depressed demand for
fiber-optic broadband services, and the sharp escalation of Global Crossing 's debt as
it laid undersea cables across the world, caused investors to lose faith in the
company. On Monday, Global Crossing 's shares closed at 30 U.S. cents apiece.
"We are confident that if the restructuring is approved by the court, we will see a
satisfactory return on our total investment" in Global Crossing , including the
convertible bond, said Ms. Yong. She declined to specify a timetable.
If all goes well, this wouldn't be the first time Mr. Li has picked up failing Internet
companies at bargain prices. Mr. Li's two companies, Hutchison and Cheung Kong
(Holdings) Ltd. a year ago jointly bought a 17.54% stake in Internet company
Priceline.com Inc. when the company stock was trading at US$2.10, later boosting the
stake to more than 30%. The stock has since tripled in value.
"Hutchison is a major telecom asset trader . . . with great sense of timing," notes
Andrew Chetham, senior analyst with Gartner. Hutchison sold its stake in European
mobile-phone provider Orange PLC to Mannesmann AG in 1999 for a gain valued at US$14.6
billion. In May, it sold its stake in VoiceStream Wireless Corp. to Deutsche Telekom AG
for a gain of more than US$4 billion. |
