More than $50 million of Global Crossing's bank debt traded last week with the announcement that XO Communications and its chairman, Carl Icahn, were making a bid for the company. Paper traded in the 21-22 context in $5-10 million pieces, one dealer noted. It had previously traded at 203/4. The XO/Icahn deal claims to offer lenders slightly more equity than the offering of Singapore Technologies Telemedia, which has entered into an agreement to purchase Global Crossing under a plan of reorganization that has already been confirmed by the bankruptcy court. The only obstacle in the way of consummating the ST Telemedia deal has been the regulatory approval by the Committee of Foreign Investment in the U.S. (CFIUS).
Whether Icahn owns any Global Crossing debt could not be determined. Calls to Icahn were not returned by press time. Icahn won control of XO last summer through purchasing the majority of the company's bank debt (LMW, 8/02). One trader suggested it would be too late to accumulate a blocking position in the Global Crossing case. The deal is viewed as being done, he said. But whether the pact is unbreakable remains to be seen. If the company wanted to get out of its agreement with ST Telemedia, it would be able to find some technicality or loophole, suggested one dealer.
Moreover, in addition to the recent offer from XO, IDT Corp. has also stated its intentions to buy the company. It could not be determined whether IDT owns any Global Crossing debt. Calls to Stephen Brown, IDT's cfo, and an attorney representing the company, were not returned. IDT recently filed an objection with the court protesting a plea from Global Crossing to extend its exclusive period to file a plan of reorganization and to amend the purchase agreement with ST Telemedia. There is a hearing today to decide these matters.
The company's period of exclusivity ran out on May 15, but Global Crossing was able to obtain a bridge order to extend the exclusivity period until the hearing today. Global Crossing will also enter into an order with the judge to approve a new purchase agreement, which will take into account that ST Telemedia is now the sole investor in Global Crossing under the agreement--after Hutchison Telecommunications Limited bowed out due to stiff resistance from CFIUS.
The revised purchase agreement will also ask the judge for a new regulatory approval deadline. According to the IDT objection, the original purchase agreement contains a clause that "authorizes any of the parties to terminate the Purchase Agreement if the Investors do not receive all governmental approvals by April 30, 2003." That deadline has come and gone, and the IDT objection suggests that if Global Crossing did not revive the deadline and decided to terminate the agreement, no break-up fee clause would be triggered. "It would appear that Global Crossing has the option to withdraw without penalty," said a buysider, passing on the sentiment of someone familiar with the situation. But under the amended purchase agreement, Global Crossing will ask that a new approval deadline be set for Oct. 14.