Asia Global Crossing 'unaffected' by failure


Hong Kong-based Asia Global Crossing says its financing plans are unaffected by subsidiary Pacific Crossing's bankruptcy

By Ravi Hiranand

HONG KONG, China -- Telecom carrier Asia Global Crossing says its financing plans are unaffected by subsidiary Pacific Crossing filing for bankruptcy.

Asia Global Crossing (AGC) has actively been seeking bidders after its parent also filed for bankruptcy.

Parent Global Crossing owns a 59 percent stake in Asia Global Crossing (AGC). Newly created Purple Communications Ltd. and Chinese telecom China Netcom Corp. have bid on the company. (full story).

But those offers came in before AGC's own Pacific Crossing subsidiary filed for Chapter 11 bankruptcy on Friday in the United States.

'It's business as usual'

A spokeswoman told CNN on Monday that the company will not be distracted from its course.

"It's business as usual for us," Selene Lo, senior manager of communications at AGC, said.

The company owns 85 percent of Pacific Crossing, which operates an underwater telecommunications cable system running between Japan and the United States.

Pacific Crossing sought protection from its creditors owing $703 million in debt to a team of 35 to 40 banks.

Filing changes terms for investment

A source familiar with Purple's plans told The Wall Street Journal that Pacific Crossing's filing makes any bid for Asia Global Crossing more difficult.

"For Purple, Netcom or anyone else doing this, the cross-Pacific connection is a crucial part of the picture."

The unnamed source added that it "just became a lot harder" to do a package deal for Asia Global Crossing and Pacific Crossing.

Lo disagreed, telling CNN that she felt Pacific Crossing's filing for Chapter 11 would be "quite agreeable" for potential investors.

Many of the 19 bidders who sniffed at AGC's books eventually walked away. Only two companies are known to have made a bid by a deadline set by AGC's investment bank advisors.

Potential investors already faced a tough time valuing AGC's key assets – a fiber-optic cable network that reaches right to China's boundaries.

The company admits that traffic over its network has been less than expected.

"The value of this fiber and this network is only as good as traffic on it," Duncan Clark, a Beijing-based telecom analyst, has told CNN. (full story)

Debts from construction

Global Crossing Ltd, which owns 59 percent of Asia Global Crossing, also filed for Chapter 11 in the United States in January.

Although AGC has yet to file for bankruptcy protection, in February the company noted that it only had enough cash to last until the second quarter of 2003.

Pacific Crossing had a $46 million payment on their debts due by the end of July and filed for bankruptcy to prevent creditors from attempting to cut their losses and liquidate the company.

It used the $703 million in limited-recourse senior secured debt to build the underwater cable.

AGC plans to write down the asset value of the company by $1.1 billion, rendering it virtually worthless in accounting terms.

AGC operates out of offices in Hong Kong and Los Angeles.