$tacks Upon $tacks Of Moolah

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Icahn makes bid for Global Crossing
By Luisa Beltran, CBS.MarketWatch.com
Last Update: 5:38 PM ET May 30, 2003







NEW YORK (CBS.MW) -- Financier Carl Icahn is going shopping again in bankruptcy court. This time he's eyeing Global Crossing, the enterprise whose brash accounting methods ended in a spectacular collapse last year.



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XO Communications, a telecommunications company newly controlled by Icahn, said Friday that it's offering to acquire Global Crossing in a cash and stock offer valued at $700 million. Reston, Va.-based XO Communications -- which itself came out bankruptcy this year -- provides bundled voice and data services for small and midsized companies

"Our proposal can close without regulatory headaches or financing contingencies and provides tremendous synergies between the two organizations that can benefit both Global Crossing's creditors and XO shareholders," Icahn said in a statement.

A spokeswoman for Global Crossing declined to comment on the proposal, which is made up of $250 million cash. The balance of XO's offer is in secured notes, junior preferred stock and warrants.

Global Crossing has already accepted a $250 million offer from Singapore Technologies Telemedia, but the agreement is awaiting approval by regulators and the court overseeing its bankruptcy proceedings.

Last August, Hutchison Whampoa and ST Telemedia reached a joint deal to buy a 61.5 percent stake in Global Crossing for $250 million, which was approved by the bankruptcy court. But in April, Hutchison (HUWHY: news, chart, profile) dropped out when a federal inter-agency group said it would open a new investigation into the acquisition. See full story.

IDT Corp.(IDT: news, chart, profile) has also made a nearly $225 million bid for Global Crossing's assets.

Accounting scandals

Florham Park, N.J.-based Global Crossing had a market capitalization of $40 billion and a $50 share price in 1999. But the telecom delivery network took on billions in debt to build its fiber optic cable system, which now spans 27 countries and 200 major cities. As the market economy waned, and the telecom sector with it, Global Crossing allegedly started improperly booking swaps of capacity with other carriers as cash transactions.

Global Crossing (GBLXQ: news, chart, profile), with $12.4 billion in debt, collapsed and filed for bankruptcy protection early last year. At that time, the filing was the fourth largest in U.S. history.

The Securities and Exchange Commission investigation into Global Crossing's accounting irregularities is continuing, a spokeswoman said Friday.

Icahn declined to comment on the SEC investigation into the company.

"There are a lot of synergies there," he said of XO's bid. "We don't have long line capacity and Global does."

Global Crossing is also paying regional Bell operating companies (RBOCs) for the last mile, which XO could take on, he said.

Initially, Icahn was not all that interested in Global Crossing but he was approached by one of the company's creditor groups.

XO's offer is also higher than ST Telemedia and is more certain of gaining regulatory approval. "We are not a foreign carrier," Icahn told CBS.MarketWatch.com. "This is an opportunity for Global Crossing creditors."

More shopping for Carl

Global Crossing is yet another example of Icahn's penchant for distressed companies. He gained control of XO (XOCM: news, chart, profile), serving as chairman, when it emerged from bankruptcy in January. The financier took over the Stratosphere casino in 1998 while it was in bankruptcy.

This week, Icahn dropped his bid to force Visx Inc.(EYE: news, chart, profile) to merge with another company. Icahn, through affiliates, was the largest shareholder of the laser eye surgery firm but apparently sold his shares when he failed to place a director on the company's board. See full story.

But Icahn is best know for his takeover of TWA in 1985. He took the troubled airline private in 1988, a move that saddled TWA with $540 million in debt. In 1992 the airline filed for bankruptcy protection.

Luisa Beltran is a reporter for CBS.MarketWatch.com in New York.

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