Tuesday February 26, 11:22 pm Eastern Time
Global Crossing Sees Major Losses
By Jessica Hall
PHILADELPHIA (Reuters) - Bankrupt telecommunications company Global Crossing Ltd. said on Tuesday it expects a massive fourth-quarter loss as it writes down the value of billions of dollars in assets, while its Asian joint venture warned its auditors may express dout about its ability to stay in business.
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Global Crossing, which operates a fiber-optic network that connects 200 cities around the world, said it expects to record charges to write down the value of $8 billion in intangible assets and goodwill, and several billions worth of network assets.
Asia Global Crossing (AX, which also expects a ``material'' fourth-quarter loss amid several charges, said it lacks enough funding to cover its business plan. It also hired outside counsel to review allegation of improper accounting at its parent company.
Both Global Crossing and its Asia Global Crossing affiliate, which lease space on their high-speed networks to other carriers and businesses, delayed the release of their full fourth-quarter financial results and provided only estimated revenues.
The uncertainty surrounding the companies' results follow problems of slim demand for voice and data transmission services, falling prices, stiff competition and hefty debt loads.
Hamilton, Bermuda-based Global Crossing filed for Chapter 11 bankruptcy on Jan. 28 in the fourth-largest insolvency in U.S. history.
Hutchison Whampoa Ltd. and Singapore Technologies Telemedia Pte agreed to pay $750 million to assume control of the company, but that proposal has been challenged by some shareholders who say it does not reflect the fair value of the company's assets.
ASIA CROSSING HIRES COUNSEL TO REVIEW ACCOUNTING
Global Crossing faces an inquiry into its accounting practices by the Securities and Exchange Commission, and a probe by the Federal Bureau of Investigation.
Concerns that Global Crossing and other telecom carriers may have artificially inflated revenues by swapping capacity on their network have slammed stocks throughout the industry.
Asia Global Crossing, a joint venture with Microsoft Corp. and Softbank, said it hired outside counsel to investigate the accounting allegations, but it has not been contacted by the SEC or FBI.
The company, which operates a high-speed communications network across Asia, said it had a number of transactions in 2001 in which it swapped capacity or services with other carriers.
It said these deals allowed it to serve certain markets before its own network was available, or to provide backup on certain routes. The business justifications and the accounting of these deals are being review.
Asia Global Crossing said its fourth-quarter revenues totaled $46.7 million, compared with $29.2 million a year ago.
During the quarter, it said it spent $23 million to acquire space on a network in China, while also selling capacity from Hong Kong to the west coast of the United States for the same amount. Also, it sold $20 million in capacity on its intra-Asia cable system to a carrier from which it bought capacity on a Japan-Australia network.
ASIA GLOBAL CROSSING TO MULL INQUIRIES FROM INVESTORS
Asia Global Crossing said investment firm Lazard Freres will help it weigh its options, which include inquiries from potential investors. At the end of 2001, it had $553 million in cash, of which $72.9 million was restricted to its Pacific Crossing joint venture.
The company expects to take a number of charges in the fourth quarter, including $232.6 million for acquisition-related charges and other items.
It also may take a charge to write down the value of its stake in the 64.5 percent-owned Pacific Crossing Ltd. joint venture. The venture built an undersea network in the Pacific that was financed, in part, by debt.
That debt is secured by Asia Global Crossing's equity stake in the PCL joint venture. It said there is ``significant likelihood'' that the operating cash flow generated by the PCL venture will be insufficient to cover interest and debt repayments.
PCL is in talks to change the terms of its obligations, but if negotiations fail the lenders can foreclose on Asia Global Crossing's equity investment in PCL and gain control of the undersea network.
GLOBAL CROSSING DIRECTOR RESIGNS
Global Crossing said it expects fourth-quarter revenues from continuing operations to be about $804 million, including service revenue of about $764 million. It did not provide a year-ago comparison.
The company said it had about $1.52 billion in cash in its bank accounts as of Feb. 25, including $492 million in bank accounts at its Asia Global Crossing subsidiary and about $327 million in other bank accounts that are restricted.
It said Mark Attanasio submitted his resignation as a member of the board of directors, and it is actively recruiting additional outside directors.
Shares of Global Crossing traded at about 9 cents when it filed for bankruptcy in January. Asia Global Crossing's stock closed Tuesday at 36 cents |
