China’s number-two fixed-line operator, China Netcom Corp is to lead a consortium that will take over the assets of Asia Global Crossing Ltd, signaling the end of its nine-month limbo since its parent Global Crossing went bankrupt.
China Netcom will lead a consortium expected to include US-based VC firm Newbridge Capital, and Japan-based Softbank Asia Infrastructure Fund. These companies will form a takeover vehicle called Asia Netcom, to take over the cable operator’s main subsidiaries.
It is expected that Asia Global Crossing will then file for bankruptcy and enter into talks with creditors to restructure approximately $750m in debt with Asia Netcom. It is envisaged that the consortium will inject $120m in new equity into the Asia Netcom takeover vehicle, and will secure a $150m credit facility to help finance the new company’s operations during the restructuring.
Asia Global Crossing owns a 40,000km undersea cable network, which links eight Asian countries with the US. It has been in trouble since February, when bankrupt parent Global Crossing refused to honor a pledge to provide it with a $400m loan.
China Netcom is regarded as a highly ambitious state-owned telecoms company that is seeking to get out of the confines of China, but at the same time take on its bigger rival, China Telecom.
The deal is subject to regulatory approvals in both the US and China, and the long-term plan is to take Asia Global Crossing private, with existing bondholders receiving cash for debt, instead of equity, in the reorganized company.