A $15 million piece of Pacific Crossing's bank debt traded at 7 out of a European bank, providing the buyer with a potential equity piece in the bankrupt company. Pacific Crossing, which is currently owned by its lenders, filed a plan of reorganization last month.
The company expects to exit from bankruptcy in the third or fourth quarter and when it emerges, $625 million out of the $650 million of debt outstanding will be converted to equity, explained Andy Jent, senior director at CXO, a restructuring firm that currently manages the distressed company. The $25 million remaining will form a new senior secured financing. Jent declined to speculate on the upside of holding the debt or the future value of the company's equity, but he said the bank debt trades periodically and some lenders do not want to hold equity in the reorganized company.
Pacific Crossing runs a fiber optic cable that connects the U.S. and Japan and is a subsidiary of Asia Global Crossing. The company was already having difficulties selling capacity three years ago after [Tyco Electronics] built a line twice its size right next to it, a trader explained. It filed for bankruptcy in July 2002. At the time the company had $700 million in bank debt that had financed the $1.35 billion construction of a PC-1 system of fiber optic cable. The credit traded as high as 98 four-and-a-half years ago. Deutsche Bank, Goldman Sachs and CIBC World Markets were the leads. Calls to Stefan Riesenfeld, Asia Global Crossing cfo, were referred to a spokeswoman who did not return them by press time.