New York, Dec. 18: Global Crossing, which collapsed under the weight of $ 12.4 billion in debts, won court approval on Tuesday for a plan to wipe out its obligations for pennies on the dollar and to emerge from bankruptcy as a new company—ready to compete aggressively against major long-distance carriers.
US bankruptcy Judge Robert E. Gerber in New York city confirmed Global Crossing’s plan to sell 61.5 per cent of its new stock to two Asian companies for $ 250 million and allocate remaining shares among four classes of creditors.
Approval of the plan also marks time for the company’s co-founder and chairman, Los Angeles financier Gary Winnick, who built the private worldwide fibre-optic network and is expected to be replaced once the company emerges from bankruptcy in the next few months.
Winnick has come under intense criticism and investigations for the company’s woeful financial condition, hurt by questionable accounting, lavish spending and extravagant salaries and bonuses. He also cashed out more than $ 575 million in stock during the company’s heydays of the late 1990s.
Ironically, even though shareholders receive nothing under the court-approved plan and the stock is officially worthless, buyers bid up Global’s shares Tuesday by 1.6 cents to 3.1 cents in trading on the electronic Pink Sheet market. The only significant hurdle left for Global is approval of the deal by the Federal Communications Commission.