Global Crossing Bankruptcy
It is very essential here for us to understand what is the meaning of global crossing. It is not any term that needs to be defined. So, the reader should not think it like any process etc what so ever. The global crossing is basically a company based in the United States. It is basically a voice and the data carrier that used to provide its services to the various telecommunications companies not only in the U.S but also in the whole world. It is also to be noted here that the global crossing is a famous name as far as the voice and data carrier are concerned. Thus, it was quite natural for everybody who heard about the company filing for the bankruptcy. Let us discuss about it in our next part of discussion.
The global crossing bankruptcy:
The company of course shocked everyone when it filed for the bankruptcy on January 28, 2002. The bankruptcy was filed under the chapter 11 of the U.S bankruptcy law. The only question that was on everybodys mind was that why did the company filed for the bankruptcy protection It is quite clear that there must be some serious reasons other wise such a renowned company worldwide would not have filed for the bankruptcy. Let us know the reasons that forced the global crossing to file the application under the chapter 11, in our next part of discussion.
Reasons for the bankruptcy of global crossing:
Let us discuss the various reasons why the telecommunication company Global Crossing file for the bankruptcy protection under the chapter 11 of the U.S bankruptcy law. It is to be noted here that when the company filed for the bankruptcy protection, it became the fourth largest company in the history of the United States to file the bankruptcy application. This gives us an idea about the size of the company and this is the reason why the news about the global crossing bankruptcy was perceived as one of the greatest setback of the company. As far as the reason for declaring the bankruptcy is concerned, it is of course financial one i.e. it is related to the balance sheet of the company. There are no operational bottlenecks as such in the company. Still the company said while filing the application for the bankruptcy that the customers were still going for the various services being provided by the company and thus, the demand of the companys network was still. These were despite that fact that the financial seriousness was being known to everybody. The company also stated that even if the customers share is declined, it would gain it when the restructuring of the company would be completed. The reorganization plan consisted of about $ 750 million. When the application for the bankruptcy was filed, the Bermuda bases company said that as a part of its reorganization plan, about 60% of the stake would be bought by the two other companies to help the company in the reorganization plan. These two companies are Hutchison Whampoa Ltd and the Singapore Technologies
Telemedia Ltd. It is to be noted here that both the above companies are the Asian companies. On the completion of the deal, the equity value of the global crossing would be $1.25 billion. This value is indeed very low as compared to the peak market capitalization of approximately $48 in the year 2000. It is also to be noted here that the company was giving so much good results that it opted to even buy the Baby Bell US West, but it could not for some other reason. As far as the history of the company is concerned, the company was once number one choice of many telecom operators across the world that wishes to increase the bandwidth. To build an undersea fiber optic cable system, the company took advances worth billions of dollars. After completion, the undersea cable constitutes about 20% of the total data leaving the United States. After the company filed for the bankruptcy, it was clear that the various shareholders of the company would definitely lose money. Even the bankers of the company would also loose billions of dollars on the collective terms. The bankruptcy application has put pressure on other telecommunication companies also as these companies are also having lots of debts to their names. The company filed for the bankruptcy under the chapter 11 in New York. As per the bankruptcy law, if the plan of the restructuring were approved by the court, the current management of the company would definitely be replaced by the other management. But one thing is sure, if the company is reorganized, it shall definitely have to win the support of its various creditors so that the plan is made successful. It is to be noted here that the network of the company reaches about 27 countries and about 200 major cities across the world. As far as the repayment of debt is considered, the company was paying about $600 million as the service of debt every year. In the third quarter, the company posted a net loss of about $3.4 billion, for the sales of telecommunications services. It was only last year that the companys financial troubles were apprehended. The idea was also being gathered by the fact that the share of the company had been declining for the past few months. Thus, it can be said that the company was of course poised for a robust growth at the time of filing the application for the bankruptcy protection under the chapter 11 of the U.S bankruptcy law if the reorganization plan goes ahead. If there are any problems in the restructuring plan worth $750 million, the future of the company is of course dark and it would definitely have to go for the liquidation.
So, the reason was financial:
Thus, it can be rightly said that the reason for the Global Crossing filing the application for the bankruptcy filing under the chapter 11 were of course financial and the operations of the company were intact. If the restructuring plans go ahead successfully, it is hoped that the company would definitely regain its image and business as soon possible. However, if the restructuring fails, the future of the global crossing is of course very dark.
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