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Posted on 07/08/2003 9:36:55 PM PDT by Bayou City
| Pentagon to Oppose STT-Global Crossing Deal-Source By Jeremy Pelofsky
WASHINGTON (Reuters) - Singapore Technologies Telemedia's plan to buy a majority stake in bankrupt Global Crossing Ltd. GBLXQ.PK ran into trouble when U.S. officials said on Tuesday the government had national security concerns about the deal.
Concerns by the Pentagon and Department of Homeland Security could make it difficult for STT, which is owned by an arm of the Singapore government, to complete its acquisition of a 61.5 percent stake in the telecommunications company.
Defense Department officials cited national security concerns in a memorandum to oppose the acquisition of the 61.5 percent stake by STT, said one official who asked not to be identified.
Meanwhile, a Department of Homeland Security official said the agency has not yet taken a position on the transaction but "we do have reservations."
Global Crossing must win approval from a committee made up of U.S. national security and economic officials, and the Pentagon's opposition could endanger completion of the deal.
"If the Defense Department is opposed, then that's a real problem for getting the deal done," said Paul Glenchur, an analyst at Schwab Capital Markets in Washington.
Global Crossing had to restructure the deal once before when STT's former partner, Hong Kong-based Hutchison Whampoa Ltd. 0013.HK , pulled out after U.S. officials raised national security concerns. Global Crossing could alter the structure of the deal again to try to win over the Pentagon.
"With Global Crossing we continue to work with all the agencies and continue to be optimistic," a STT spokeswoman said.
A Global Crossing spokeswoman and a Pentagon spokesman declined to comment.
Global Crossing, the operator of a high-speed fiber-optic network in 27 countries, filed for bankruptcy protection in January 2002 after buckling under $12.4 billion of debt, a soft economy, steep competition and a glut of network capacity.
STT agreed to pay $250 million for the stake in the company, and the companies on June 20 filed a formal application for approval from the U.S. Committee on Foreign Investment, which reviews and must sign off on such deals with foreign entities.
The panel must decide within 30 days of the filing whether to allow the transaction to go forward or extend its investigation for another 45 days. After the extended review, President Bush would have 15 days to decide whether to allow the deal.
If STT's bid for the Global Crossing stake is shot down, that could open the doors for competing bids, and several carriers have expressed interest in getting their hands on the company's global telecommunications network.
XO Communications XOCM.OB , which is controlled by financier Carl Icahn, has been the most aggressive suitor, gobbling up Global Crossing's debt and making an unsolicited takeover offer.
XO, which has increased four times its offer to acquire Global Crossing's assets or debt, has won the backing of Global Crossing's lenders, but the offers have been rebuffed by the company's management and unsecured creditors.
Icahn said on Tuesday that his firm will step up efforts to persuade politicians and regulators about the dangers of STT owning a controlling stake in Global Crossing.
"I believe, along with many in Congress, that foreign governments should not own and control a large U.S. telecom company, for security reasons," Icahn told Reuters.
Last week, the bankruptcy court extended STT's exclusive takeover rights for the U.S. company and said that the regulatory review could take one to three more months.
Separately, Global Crossing asked the bankruptcy court to force XO and Icahn to produce documents about his bid and lobbying efforts to see if he or others at his company improperly interfered with the deal.
"Because of these threats, we will become much more active in lobbying or whatever effort it takes," said Icahn. "Ironically, we have not interfered in the government process, but it is interesting that we are now being threatened with allegations concerning interference." (Additional reporting by Andrea Shalal-Esa and Deborah Charles in Washington, Dane Hamilton in New York and Jessica Hall in Philadelphia)
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FreeRepublic , LLC PO BOX 9771 FRESNO, CA 93794
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There was a FReeper who kept this story alive and well for more than a month or two... Who was it? There is something sinister lurking just beneath the surface with this troubling story that just begs to be uncovered!!!
Following are some older FR links to global crossing.
Former Ullico exec refuses to testify to lawmakers (GLOBAL CROSSING, TERRY MCAULIFFE)
I would suggest they nationalise the company and put it under Homeland Security.
However I would not listen to XO or its chairman, businessmen will tell you anything you want ot hear, as long as they get their money for example; Ken at Enron.
News report July 12, 2002 In a somewhat less welcome investment, Billionaire financier Carl Icahn reportedly made a $331 million bid to acquire a substantial amount of the bank debt of bankrupt telecommunications firm XO Communications. If the deal were successful, it would make Icahn one of XO’s most senior creditors, giving him considerable say in the company’s future.
That one sentence mostly summarizes what's wrong with this picture:
1. A foreign investor owning a US telephone company.
2. A single foreign investor having absolute majority control of a US telephone company (usually stock ownership is diffuse; having as much as 5-10% in the hands of one owner is enough to control the company, jerk the stock price around, etc.; one investor owing 62% or even 10% is very unusual).
3. That single foreign investor being a foreign government. Although I guess they're "friendly" right this minute. But what if they decide, for instance, they don't like US policy on Taiwan and China? Or US policy towards neighboring Malaysia (an Islamic country), or North Korea? And even "friendly" governments spy on each other.
Oh yeah, and this is a bankruptcy sale. Debt goes away in bankruptcies. This new telco would have no debt - plus the deep pockets of the Singapore Government. Know how much debt other US carriers like AT&T have these days? (A bunch.) This new thing could run AT&T etc. out of business.
Not even saying Singapore is necessarily doing anything outlandishly evil - they're a small bit of territory in a tough neighborhood looking after their own long-range interests.
But the US should be doing the same.
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