Bargain seeking investors step to front of the line. (Up Front).

Staff Reporter

As fire sales go, this one's a scorcher.

A letter of intent filed in bankruptcy court last week calling for Hutchison Whampoa Ltd. and Singapore Technologies Telemedia to buy a 79 percent equity stake in Global Crossing Ltd. for $750 million translates to less than a nickel on the dollar for the world's biggest fiber-optic network and other assets carrying a book value of $22.4 billion.

"This is a transaction that is very favorable to these two investors and ignores the common shareholders. That doesn't appear to be a fair transaction," said Robert Jigarjian, nameplate partner at Green Fauth & Jigarjian in San Francisco.

Jigarjian represents Global Crossing common shareholders in a civil complaint filed Feb. 1 in Los Angeles Superior Court. It alleges that Global Crossing directors breached their fiduciary duty to shareholders by agreeing to the Hutchison-Singapore deal.

Even Global Crossing officials characterize the proposed deal as low-ball. In its Feb. 4 bankruptcy court filing, the bid is repeatedly referred to as a "stalking horse" proposal intended to "promote competitive bidding and, thereby, maximize the value of (Global Crossing's) estate."

But as of late last week, no competing bid to buy Global Crossing had been filed, although LDT Corp. -- a Newark, N.J. -based telecom company -- had expressed interest in possibly buying the company's Frontier Networks phone system, Bloomberg News reported.

Global Crossing spokeswoman Tisha Kresler, in response to critics' claims that the pending bid is a sweetheart deal, said: "The investment proposal was made in good faith with two companies with whom we have longstanding relations"

Other entities mentioned as of late last week as possible competing bidders included AT&T Corp., Verizon Communications Inc. and other publicly traded telecom giants. But getting such an acquisition approved by shareholders and directors could be difficult, given the current business climate.

"Post-Enron, this is not the kind of deal corporate boards are going to want to approve -- sinking hundreds of millions into a network with minimal prospects of being profitable in the short term or even intermediate term," said Christopher Beard of Beard Group Inc., a Washington D.C. publisher of newsletters on distressed companies.

Several analysts agreed that the Asian investors, if their proposed buyout is approved, would ultimately reap huge profits from their investment. And their downside risk of the deal falling through is essentially nil.

The proposed deal includes a $40 million "termination fee" if a competing bid is selected. Meantime, the Asian investors are getting all their out-of-pocket expenses reimbursed by Global Crossing, up to $10 million worth.

"It is very much akin to buying a piece of raw land," said Beard. "A piece of land you can't develop will ultimately choke you unless it (gets developed and) starts to carry itself, or you're in a position to carry it."

Hutchison Whampoa and Singapore Technologies can carry Global Crossing for several years, until telecom demand is expected to finally catch up with existing fiber-optic capacity. Hutchison is controlled by Hong Kong billionaire Li Ka-Shing and Singapore Technologies is controlled by the Singapore government.

So while U.S. telecom companies might balk at buying Global Crossing for fear of alienating shareholders and analysts, "Li KaShing doesn't care what you think," Beard said.