Global Crossing takes $8bn writedown

 

Troubled telecoms company Global Crossing will take an $8 billion (€9 billion) goodwill write-down for the fourth quarter to reflect the fall in value of some of its assets.

The firm, which provides one-third of the Republic's international telecoms capacity, revealed the information in a US court filing late on Tuesday. It warned of a multi-billion dollar write-down of tangible assets.

Global Crossing is the lynchpin of the Republic's plan to become an e-business hub and it won a €126 million public-private partnership deal with the State in 1999. It has laid an undersea cable connecting the Republic to its global network which Irish firms use to supply customers with telecoms capacity.

But the company's recent filing for chapter 11 bankruptcy protection in the US and the prospect of a huge writedown in the value of its assets may undermine this deal.

The uncertainty centres on the terms of the Government's original contract with Global Crossing and two final grant payments worth $15 million, due this year.

The State has already paid €62 million for managed capacity and infrastructure to the US telecoms firm, which was valued at $22 billion until very recently. But sources said yesterday that if the price of the company's products fell or rose significantly due to the writedown, it could undermine the State's deal. Likewise, if the deal was tied to certain financial viability targets, then the State may have to pull out later this year.

A Department for Public Enterprise spokesman said yesterday the Government was continuing to monitor all development associated to Global Crossing. It has appointed law firms Skadden Alps and A&L Goodbody to advise on the company's bankruptcy proceedings.

It is expected the Government will make a final decision on whether to pay the additional payments by June, when the first of the two payments are due. But this decision may be complicated due to an auction process for the assets of Global Crossing which is not due to be completed until July.

Meanwhile, it emerged yesterday that British Telecom and Deutsche Telekom are among about 50 firms that have expressed an interest in acquiring Global Crossing. The New York Times reported in its online edition that the identities of more than 50 companies, which have expressed confidential interest in acquiring Global Crossing, are no longer secret to one another because of an e-mail sent by the telecom firm's law firm. The message, which included only routine information on bidding procedures for Global Crossing, inadvertently named each of the more than 50 recipients by copying their e-mail addresses at the top of the message.

The potential bidders include telecoms companies: Verizon Communications, the BT Group, Deutsche Telekom AG, Telefonica of Spain and Telefonos de Mexico.

Other companies included in the e-mail message are financial investors such as Credit Suisse First Boston, Bank One, the Canadian Imperial Bank of Commerce, the Quadrangle Group of New York and the Carlyle Group of Washington, the Times reported.

Metromedia Fibre Networks, the troubled US internet firm which owns a $75 million internet data centre in Dublin, said it had lost two contracts worth $175 million in revenues with two companies, Verizon and Genuity. Verizon also said yesterday that it had lowered the value of its investment in Metromedia, which said it may file for chapter 11 bankruptcy as part of a debt restructuring. - (Additional reporting, Reuters)