/raid1/www/Hosts/bankrupt/TCRLA_Public/030415.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Tuesday, April 15, 2003, Vol. 4, Issue 74
Headlines
A N T I G U A & B A R B U D A
LIAT: Leaders Delay Bail Out Details, Final Decision on Airline
A R G E N T I N A
CAPEX: Local S&P Drops US$295 Million of Bonds Junk Status
DISCO: 40 Supermarkets on Sale, Bidders Continue to Emerge
JUAN MINETTI: US$12 Million Bonds Rated `raD' by Local S&P
MULTICANAL: Argentine S&P Rates Various Bonds `raD'
TGS: One-third of Bondholders OK Debt Restructuring Plan
B E R M U D A
GLOBAL CROSSING: Moves Again To Extend Exclusive Periods
GLOBAL CROSSING: Motion To Approve Financing Commitment Letter
GLOBAL CROSSING: Motion To Approve AGX Settlement Agreement
GLOBAL CROSSING: Motion To Approve EPIK Settlement Agreement
GLOBAL CROSSING: Seeks Approval of Interconexion Agreement
GLOBAL CROSSING: Seeks Teleglobe Settlement Agreement Approval
GLOBAL CROSSING: Examiner To Allow Filing Of Interim Reports
GLOBAL CROSSING: ITXC Seeks To Lift Stay To Effectuate Setoff
GLOBAL CROSSING: BNY Seeks To Lift Stay To Disburse Funds
GLOBAL CROSSING: PCL Opposes Pursuit of Adversary Proceeding
B R A Z I L
EMBRATEL: Plans to Offer New Internet Protocol-based Service
IPIRANGA PETROQUIMICA: Pleads for Two-year Debt Moratorium
TELESP CELULAR PARTICIPACOES: TRO Acquisition Finalized
USIMINAS: Books BRL320 Million First Quarter Net Profit
C H I L E
INVERLINK: Questioning Continues as Scandal Unfolds
INVERLINK: SVS Chairman Pressured By Government to Resign
C O L O M B I A
INTERACCION SA: Regulator Intervenes Business Due to 'Misdeeds'
E C U A D O R
PETROECUADOR: Budget Committee Report Out Today
M E X I C O
CFE: Power Reform Bill Threatens Stability, Growth of Sector
TV AZTECA: To Propose First of Dividend Payouts During AGM
P E R U
BELLSOUTH PERU: Gears Up for Stiff Competition with Telefonica
T R I N I D A D & T O B A G O
BWIA: Sends Home Another Twenty Pilots
BWIA: Government Delays Bail Out Decision, Says BWIA Hid Data
U R U G U A Y
ANCAP: Won't Be Affected on Uruguay Sovereign Debt Downgrade
V E N E Z U E L A
CANTV: Government Approves 19% Hike in Non-residential Rates
- - - - - - - - - -
=================================
A N T I G U A & B A R B U D A
=================================
LIAT: Leaders Delay Bail Out Details, Final Decision on Airline
---------------------------------------------------------------
Regional Prime Ministers announced that they have postponed a
decision on LIAT until Sunday, said the Barbados Advocate. The
announcement came after the leaders met on Friday, concerning the
airline's future, and a possible rescue plan.
"There are some issues which have arisen which we require further
study on by the technical committee which met here on Wednesday.
They presented an excellent report to us and we have reflected on
that report and other issues have emerged, and we want further
study on those issues," said St. Vincent and the Prime Minister
Ralph Gonsalvez.
Present at the Friday meeting were Prime Ministers Owen Arthur of
Barbados, Patrick Manning of Trinidad and Tobago, Lester Bird of
Antigua and Mr. Gonsalvez of St. Vincent and the Grenadines.
Mr. Gonsalvez said that the leaders and legal people are asking
for some time to reflect on the new information.
"On Sunday we meet again, as heads consider the advice that is
being represented to us in relation to the kind of financial
obligations that we will have to assume however this matter turns
out, such that we can make the best decisions based upon the best
information," he added.
The leader also declined to comment on the issue, saying it is
premature to say how much money each government would be
injecting into the airline.
CONTACT: LIAT Corporate Headquarters
V.C. Bird International Airport,
P.O. Box 819,
St. John's, Antigua West Indies
Phone: 1 (268) 480-5600/1/2/3/4/5/6
Fax: 1 (268) 480-5625
Homepage: http://www.liatairline.com/
Contacts:
Garry Cullen, Chief Executive Officer
David Stuart, Vice President of Marketing
=================
A R G E N T I N A
=================
CAPEX: Local S&P Drops US$295 Million of Bonds Junk Status
----------------------------------------------------------
The Argentine Branch of Standard & Poor's International Ratings,
Ltd. issued junk ratings to a total of US$295 million of Capex
S.A. corporate bonds `raD' on April 7. According to the National
Securities Commission of Argentina, the affected bonds are all
described as "Obligaciones Negociable Simples." A total of US$145
million of the said bonds were rated `raD', while the remaining
US$150 million were rated `raCC'.
Of the bonds rated `raD', US$105 million matures on December 23,
2004, while US$40 million, on June 11, 2004. A `raD' rating is
issued to obligations in payment default or if the Company has
filed for bankruptcy.
The bonds rated `raCC' comes due on January 1, 2005. Bonds rated
`raCC' is currently highly vulnerable to nonpayment, said the
ratings agency.
Meanwhile, the Company's stocks were rated `4' by the same
ratings agency. NSC described the stocks as "Acciones Ordinarias
en Circulaci˘n Clase A de 1 voto c/u, V/N $ 1."
The ratings were based on the Company's performance as of the end
of January 2003.
CONTACT: Capex SA
5/F DepartmentC
948/950 Av Cordoba
Buenos Aires
Argentina
Phone: +54 11 4322 4884
Home Page: http://www.capex.com.ar
Contacts:
Enrique Gotz, Chairman
Dr. Alejandro Enrique Gotz, Vice Chairman
DISCO: 40 Supermarkets on Sale, Bidders Continue to Emerge
----------------------------------------------------------
A group of local businessmen led by Jose Angulo has reportedly
entered the bidding for the Disco chain of stores, part of Royal
Ahold's vast operations in Latin America, NewsEdge said late last
week. This group is said to be eyeing the supermarkets in the
Cuyo area operating under the Super Vea brand and number more
than 40, says the report. The operation is valued at ARS200
million, NewsEdge adds. The buyer, however, will have to take on
Ahold's debts estimated to be US$350 million.
Other groups interested in the chains are Wal-Mart, Cencosud,
Carrefour, Casino -- all of which are supermarket giants in the
U.S. and Europe -- and two other groups of businessmen led by
Francisco de Narvaez and Alberto Guil, respectively. Investment
funds CoInvest, The Exxel Group and Zeus have also expressed
interest in Disco.
Ahold first announced its intention to sell Disco in Argentina
and its subsidiaries in Brazil, Peru and Paraguay nearly two
weeks ago.
CONTACT: Ahold
Corporate Communications
Phone: +31.75.659.5720
JUAN MINETTI: US$12 Million Bonds Rated `raD' by Local S&P
----------------------------------------------------------
A total of US$12 million dollars of corporate bonds issued by
Juan Minetti were rated `raD' by Standard & Poor's International
Ratings, Ltd. Sucursal Argentina on April 7, said the National
Securities Commission of Argentina.
The bonds, described as "Obligaciones Negociables, no
convertibles y subordinadas, emission aprobada pro Asamblea Gral.
Ordinaria y Extraordinaria de fecha 10.11.95", would come due on
December 2005.
S&P said that the `raD' is given when the bond is in payment
default or if the Company has filed for bankruptcy. The said
rating is given when interest or principal payments are not made
on the date due, even if the applicable grace period has not
expired, unless the rating agency believes that such payment will
be made during the grace period.
In related news, the Company's stocks, described as "Acciones
Ordinarias en Circulacion de 1 voto c/u, V/N $1" were rated `4'
by the same ratings agency.
CONTACT: Minetti, Juan SA
87 Ituzaingo
Cordoba
Argentina 5000
Phone: +54 51 26 7529
Fax: +54 51 24 4709
Home Page: http://www.juanminetti.com.ar
Contacts:
Dr. Manuel Augusto J. Baltazar Ferrer, Chairman
Atty. Carlos Buhler, Executive Vice Chairman & General
Manager
MULTICANAL: Argentine S&P Rates Various Bonds `raD'
---------------------------------------------------
The Argentine arm of Standard & Poor's International Ratings,
Ltd. rated various corporate bonds issued by Multicanal, S.A.
`raD' on April 7, according to an announcement from the country's
National Securities Commission.
An obligation is rated `raD' when it is payment default or the
Company has filed for bankruptcy, said S&P. The rating is used
when interest or principal payments are not made on the due date
even if the applicable grace period has not expired, unless S&P
believes such payments will be made during the said grace period.
The rating was based on the Company's financial health as of
December 31, 2002.
The affected bonds include US$125 million worth of bonds
described as "Obligaciones Negociables simples, con vencimiento a
10 a¤os, autorizada poa AGOyE de fecha 7.10.96" due on February
1, 2007, and classified under "Simple Issue".
The rating also applies to "Obligaciones Negociables simples, con
vencimiento a 5 a¤os, autorizadas por AGOyE de fecha 7.10.96",
worth US$125 million, also under "Simple Issue". These bonds came
due on February 1, 2002.
Classified under "Series and/or Class", bonds described as "Serie
J de ON bajo el Programa de ON de USD 1050 MM" were also given
the same junk ratings. The bonds, whose maturity date was not
indicated, were worth a total of US$144 million.
Another US$150 million worth of "SERIE C, bajo el Programa de U$S
1050 millones" also under "Series and/or Class", were rated
`raD'. These would come due on April 15, 2003.
The rating was also issued to "Serie E de Ons, bajo el Programa
de U$S 1050 millones" worth a total of US$175 million. These
bonds, classified under "Series and/or Class", would come due on
April 15, 2009.
CONTACT: MULTICANAL S.A.
Avalos 2057
C1431DPM Buenos Aires, Argentina
Tel: 54 11 4524-4700
Fax: 54 11 4370-5162
Contact: Fabian Melnitzky
E-mail: fmelnitz@redarg.com.ar
TGS: One-third of Bondholders OK Debt Restructuring Plan
--------------------------------------------------------
The debt restructuring of natural gas distributor, Transportador
de Gas del Sur, is nearly complete after its Series 1, 2 and 3
bondholders approved the firm's 'accord' on Friday, says Dow
Jones.
The bondholders who have so far approved the debt accord
represent US$219 million of the company's US$600 million total
notes. During the meeting in Buenos Aires, Dow Jones says half
of the Series 1 and 2 noteholders and two-thirds of the Series 3
bondholders gave their nod to the plan. Bondholders holding the
Series 4 notes, also called OPIC bonds, could not vote on the
plan during the meeting for lack of quorum.
The company expects to complete the plan shortly: "[We are]
working on trying to reach the necessary majorities over the next
few days to endorse the APR (extra-judicial accord), as mandated
by the Argentine law and complete the restructuring."
TGS has so far managed to keep up-to-date its dollar debt
servicing costs, despite the freezing of utility tariffs by the
Argentine government and last year's 70% collapse in the peso. In
late March, however, the company missed a capital payment on a
maturing debt, Dow Jones says.
Troubled Company Reporter-Latin America has no information yet as
to the content of the accord, but some analysts believe the
restructuring will involve a lowering of interest rates and an
extension of maturities.
CONTACTS: IN BUENOS AIRES
Investor Relations:
Eduardo Pawluszek, Finance & Investor Relations Manager
Gonzalo Castro Olivera, Investor Relations
Email: gonzalo_olivera@tgs.com.ar
Mara Victoria Quade, Investor Relations
Phone: (54-11) 4865-9077
Email: victoria_quade@tgs.com.ar
Media Relations:
Rafael Rodriguez Roda
Phone: (54-11) 4865-9050 ext. 1238
=============
B E R M U D A
=============
GLOBAL CROSSING: Moves Again To Extend Exclusive Periods
--------------------------------------------------------
Michael F. Walsh, Esq., at Weil Gotshal & Manges LLP, in New
York, reminds the Court that on August 9, 2002, Global Crossing
entered into that certain purchase agreement with Hutchison
Telecommunications Limited and Singapore Technologies Telemedia
Pte. The Purchase Agreement forms the basis of the Plan, which
is contingent on the occurrence of a "closing". Under the
Purchase Agreement, after Closing, the Investors will purchase
their interests in the Debtors.
The Transaction is contingent on the occurrence of several
events. Most importantly, Global Crossing must:
(i) satisfy certain financial tests, exit cost requirements,
and other administrative obligations specified in the
Purchase Agreement; and
(ii) obtain approvals of the Transaction from various federal
and state governmental authorities.
Global Crossing has already satisfied most, if not all, of the
Closing Conditions.
By this motion, Global Crossing ask the Court to extend the
Exclusive Filing Period to allow sufficient time to complete the
Closing Conditions in order to protect their estates and
consummate the Plan. Global Crossing seek an extension of the
Exclusive Filing Period to the earlier of May 15, 2003, or in the
event the Purchase Agreement is terminated in accordance with its
terms by any of the parties, two weeks from the date of
termination. Global Crossing also seek an extension of the
Exclusive Solicitation Period until 60 days after the Extended
Exclusive Filing Period.
Mr. Walsh tells the Court that earlier in these cases, the
Debtors timely sought extensions of the Exclusive Periods because
the Debtors required additional time to resolve certain critical
business issues and formulate and negotiate the Plan. When the
Debtors filed their Third Exclusivity Motion, the Court had
recently confirmed the Plan and the Debtors were continuing their
efforts to obtain the requisite regulatory approvals and to
finalize their financial reporting for the end of 2002 to satisfy
the Closing Conditions under the Purchase Agreement.
Since that time, the Debtors have been diligently working to
satisfy the outstanding Closing Conditions to consummate the
Plan. Consequently, the Debtors are not seeking a further
extension of the Exclusive Periods to pressure creditors "to
accede to [the debtors'] reorganization demands." Rather, the
Debtors have submitted a Plan that has been accepted by their
creditors and confirmed by the Court, and the Debtors are now in
the process of satisfying their obligations under the Purchase
Agreement in order to consummate the transactions contemplated by
the Plan and the Purchase Agreement.
Since filing the Third Exclusivity Motion, Mr. Walsh contends
that the Debtors have made notable progress towards satisfying
the Closing Conditions. Pursuant to the Purchase Agreement, as
of December 31, 2002, the Debtors are required to have a cash
balance equal to or exceeding $194,000,000 and net working
capital equal to or exceeding $8,000,000. Preliminary reports
indicate that the Debtors have satisfied both financial
covenants. Currently, the Investors are auditing the Debtors'
performance.
The Purchase Agreement requires the Debtors to limit the costs
associated with emergence from Chapter 11. To comply with this
exit cost requirements, Mr. Walsh states that the Debtors have
entered into several settlement agreements with parties to
executory contracts and unexpired leases, whereby the Debtors
have successfully negotiated reduced cure costs to be paid in
connection with assumption of these agreements pursuant to
Section 365 of the Bankruptcy Code. In addition, the Debtors
have resolved numerous claims with respect to amounts owed to
network access providers, vendors, and certain taxing
authorities, as well as amounts in respect of pending litigation.
These efforts will decrease the Debtors' exit costs and satisfy
exit cost requirements under the Purchase Agreement.
The Purchase Agreement also requires the Debtors to obtain
certain regulatory approvals for the transactions contemplated.
Since the filing of the Third Exclusivity Motion, the Debtors
have worked to obtain these regulatory approvals from various
federal, state, and foreign regulatory authorities:
A. expiration or early termination of the applicable waiting
periods under the Hart Scott Rodino Antitrust Improvements
Act of 1976;
B. approval of the State public utility or service commission
in 25 States for the proposed transfer of control of the
holders of telecommunications licenses from Global Crossing
to reorganized Global Crossing;
C. approvals from the regulatory authorities of Singapore, the
United Kingdom, and Brazil for the proposed transfer of
control of the holders of telecommunications licenses from
Global Crossing to reorganized Global Crossing;
D. approval or clearance from the competition authorities in
Canada, Mexico, Brazil, and the European Union under
relevant competition laws and regulations; and
E. approval from the Federal Communications Commission for
the proposed transfer of control of the holders of
telecommunications licenses from Global Crossing to
reorganized Global Crossing.
In addition, the Debtors are also cooperating with the federal
Committee on Foreign Investment in the United States in
connection with its review, pursuant to the Exon-Florio Amendment
to the Defense Production Act of 1950, of the proposed ownership
interests of the Investors in the reorganized Global Crossing.
On November 19, 2002, the Federal Trade Commission granted early
termination of the applicable waiting periods under the HSR Act.
Since that date, Mr. Walsh informs the Court that the Debtors
have also received the requisite approvals from all the public
utility or service commissions in the individual states requiring
these approvals, and all the approvals and clearances in the
foreign jurisdictions in which they operate. The Debtors'
applications to the Federal Communications Commission are pending
and the Debtors anticipate receiving the requisite approvals in
the near future. The Debtors are working diligently with their
advisors to obtain CFIUS approval of the Purchase Agreement. The
CFIUS review process is ongoing and will extend beyond the
current March 31, 2003 deadline of the Exclusive Filing Period.
In the event that any of the regulatory bodies do not approve the
Purchase Agreement and the financial tests are not met requiring
the Debtors to abandon the Plan, the Debtors seek an opportunity
to propose and solicit a new plan of reorganization without
competing plans. Without an extension of exclusivity, Mr. Walsh
is concerned that the Debtors would be left to not only operate
their business, but to do so while hurriedly working to formulate
and negotiate a new or revised plan, assess competing plans that
are filed, and contend with the destabilizing effect that these
events would have on their business, employees, vendors, and
customers.
Mr. Walsh asserts that the loss of exclusivity would have a
deleterious effect on the Debtors, their estates, their
creditors, and all parties-in-interest. It would be nearly
impossible for the Debtors to dedicate sufficient resources to
formulating a new plan if the Debtors were required to focus on
analyzing and responding to competing plans submitted by other
parties. Moreover, the Exclusivity Periods have permitted the
Debtors to negotiate and reach reasonable agreement with the
Creditors' Committee and the Debtors' prepetition lenders without
the pressure of entertaining competing plans of reorganization.
If the Debtors cannot preserve the exclusive right to present and
file a plan of reorganization and solicit acceptances, the
Debtors will lose the benefit derived from the yearlong
negotiations that have permitted the parties-in-interest to forge
reasonable terms of reorganization.
The Court extends the Exclusive Filing Period until the
conclusion of the April 21, 2003 hearing on the Debtors' request.
(Global Crossing Bankruptcy News, Issue No. 37, Bankruptcy
Creditors' Service, Inc., 609-392-0900)
GLOBAL CROSSING: Motion To Approve Financing Commitment Letter
--------------------------------------------------------------
Global Crossing sought and obtained the Court's authority to:
(i) enter into a commitment letter with Prospective Lenders
on substantially the terms specified in the Proposal
Letter and the Fee Letter; and
(ii) pay a commitment fee equal to 1% of the aggregate amount
of the commitment under the Working Capital Facility.
Paul M. Basta, Esq., at Weil Gotshal & Manges LLP, in New York,
informs the Court that Global Crossing are in the process of
arranging a working capital facility for New Global Crossing in
connection with the effective date of the Plan. Global Crossing
has continued to negotiate with the Prospective Lenders on the
terms of the Working Capital Facility in the event the
Prospective Lenders agree to provide the exit financing. On
March 21, 2003, Global Crossing received a proposal letter and
fee letter from Prospective Lenders, which set forth the material
terms pursuant to which the Prospective Lenders would consider
providing an exit financing facility to New Global Crossing.
Neither the Proposal Letter nor the Fee Letter binds the
Prospective Lenders to make a commitment to provide the Working
Capital Facility. However, they do describe the material terms
on which a commitment for the Working Capital Facility can be
based. Global Crossing hope to receive a commitment from the
Prospective Lenders as soon as the Prospective Lenders complete
their due diligence.
In anticipation of providing a firm commitment for the Working
Capital Facility, the Proposed Lenders have delivered the
Proposal Letter and the Fee Letter to the Debtors, which together
outline the terms of the contemplated financing. The salient
terms of the proposal are:
A. Borrowers: New Global Crossing and certain subsidiaries to
be determined.
B. Agents: GE Capital, as Administrative Agent, Documentation
Agent and Collateral Agent and Merrill Lynch as Syndication
Agent.
C. Lenders: GE Capital, Merrill Lynch, and other lenders
acceptable to the agents under the Working Capital
Facility, and during the primary syndication, acceptable to
the Borrowers.
D. Arrangers: GECC Capital Markets Group, Inc. and Merrill
Lynch.
E. Amount: Up to $150,000,000, as determined by the Agents
and, at the Borrowers' request, up to $200,000,000.
F. Term: The earlier of 42 months or 6 months prior to the
maturity of the New Senior Secured Notes.
G. Availability: Up to 85% of the borrowers' eligible billed
accounts receivable and up to 40% of eligible unbilled
accounts receivable, less reserves, including a dilution
reserve to be determined based on historical levels. The
Agents will conduct due diligence and determine the
eligibility percentage, if any, of foreign receivables in
their sole discretion. The Collateral Agent will have the
right from time to time to establish and modify advance
rates, standards of eligibility and reserves against
availability in its reasonable credit judgment, with notice
of any modification to be provided to the Borrowers
promptly thereafter. The face amount of all letters of
credit under the Letter of Credit Subfacility will be
reserved in full against availability.
H. Minimum Excess Availability: $50,000,000 until Agents
receive audited financial statements and the financial
statements do not reflect any material adverse change from
the 2001 and 2002 unaudited financial statements and
disclosure schedules delivered to Agents, all as determined
in the Agents' reasonable credit judgment. After receipt
of the satisfactory 2001 and 2002 audited financial
statements, minimum excess availability requirement to be
reduced to $25,000,000 on an ongoing basis.
I. Use of Proceeds: For funding working capital and general
corporate purposes, and subject to Minimum Liquidity, to
purchase up to a cumulative total not to exceed $25,000,000
of the New Senior Secured Notes.
J. Interest: At the Borrower's option, either:
(i) absent a default, 1, 2, 3, or 6-month reserve adjusted
LIBOR plus the Applicable Margins; or
(ii) floating at the Index Rate -- higher of Prime or 50
basis points over Fed. Funds -- plus the Applicable
Margins.
K. Applicable Margins: Revolver Index Margin 2%; Revolver
LIBOR Margin 3.50%; L/C Margin 3.50%.
L. Fees:
-- A commitment fee of 1% of the aggregate amount of the
commitment for the exit financing facility after
execution of the commitment letter;
-- A closing fee of 2.875% of the aggregate amount of the
commitment for the exit financing facility, which will
be credited amounts paid after execution of the
commitment letter and any excess amount of the deposit;
-- $200,000 administrative fee payable on the closing date
and on each anniversary of the closing date;
-- An arrangement fee of 0.125% of the aggregate amount of
the commitment for the exit financing facility payable
to the Administrative Agent under the Working Capital
Facility;
-- Letter of Credit Fee equal to the L/C Margin; and
-- Unused commitment fee of:
(i) 1% per annum, if the daily average used portion of
the financing during any month is less than
33-1/3%; and
(ii) 0.75% per annum, if the daily average used portion
of the financing is greater than or equal to
33-1/3% but less than 66-2/3%, and 0.50% per annum,
if the daily average used portion of the financing
during any month is greater than or equal to
66-2/3% of the total commitment for the Working
Capital Facility.
M. Default Rates: Up to 2% above the rate otherwise
applicable.
N. Collateral: Fully perfected first priority security
interest in the existing and after acquired real and
personal, tangible and intangible assets of Borrower. All
collateral will be free and clear of other liens, claims,
and encumbrances, other than a junior lien to secure the
New Senior Secured Notes to the extent the lien is subject
to an intercreditor and subordination agreement in form and
substance satisfactory to Agents under the Working Capital
Facility and their counsel. Each of the Borrowers'
subsidiaries would guarantee the obligations of the
Borrowers. Each Borrower would cross-guarantee the
obligations of each other Borrower. The Collateral Agent
will receive a pledge of all of the issued and outstanding
capital stock of each Borrower and a security interest in
all of the assets of each Borrower and subsidiary.
O. Mandatory Prepayments: Customary mandatory prepayment after
disposition of assets and other transactions to be
determined. No mandatory commitment reduction would be
required after disposition of assets. Syndication
Arranger will have the right to syndicate the Working
Capital Facility.
The Debtors believe that it would be advantageous to put the
Working Capital Facility in place on the effective date of the
Plan. Mr. Basta contends that closing on an exit financing
facility after the effective date of the Plan will allow the
Debtors to simultaneously secure the New Senior Secured Notes and
the Working Capital Facility. A coordinated process will be
cost-effective and efficient for New Global Crossing and the
Debtors' creditors. In addition, the Debtors have determined
that arranging the Working Capital Facility at this time will
facilitate the mechanics of obtaining this facility and will
enhance the business prospects of New Global Crossing.
Although generally a debtor will seek court approval when a
commitment letter has been finalized, Mr. Basta notes that the
Debtors have already spent an extensive amount of time
negotiating the terms of the Working Capital Facility with the
Prospective Lenders in connection with the Proposal Letter.
Accordingly, the Debtors believe that a commitment letter on
substantially similar terms as the Proposal Letter is a favorable
proposal for the Working Capital Facility. Similarly, the fees
and expenses that are set forth in the Proposal Letter and Fee
Letter were extensively negotiated by the parties in good faith
and are within the range of fees and expenses in the market for
comparable financing facilities. All of the fees are payable at
closing except for the 1% commitment fee, which is payable after
execution of a commitment letter. To ensure that the Debtors are
in a position to bind the Prospective Lenders to these favorable
terms, the Debtors want to enter into the commitment letter and
to pay the fees and expenses, including the 1% commitment fee
payable after execution of the commitment letter, pursuant to the
Proposal Letter and Fee Letter.
(Global Crossing Bankruptcy News, Issue No. 37, Bankruptcy
Creditors' Service, Inc., 609-392-0900)
GLOBAL CROSSING: Motion To Approve AGX Settlement Agreement
-----------------------------------------------------------
Global Crossing asks the Court to approve an overall settlement
that resolves all claims with the AGX Debtors, provides
transition services for the AGX Debtors' businesses to facilitate
the sale of assets to Asia Netcom, extends and revises certain
undersea cable maintenance agreements between the parties, and
establishes the terms for a continuing telecommunications
business relationship.
Paul M. Basta, Esq., at Weil Gotshal & Manges LLP, in New York,
informs the Court that Global Crossing owns 58.5% of the common
stock of Asia Global Crossing Ltd. Global Crossing and AGX have
a long-standing commercial relationship. In particular, Global
Crossing uses AGX's pan-Asian telecommunications network to
terminate traffic for its customers and AGX uses Global
Crossing's network throughout the rest of the world to terminate
telecommunications traffic for its own customers. Global
Crossing also maintains the AGX network and provides numerous
back office services, including billing and accounting functions.
AGX has asserted over $1,000,000,000 in prepetition claims
against Global Crossing and Global Crossing is prepared to prove
that it has over $330,000,000 of claims against certain of AGX's
non-debtor subsidiaries. Over the last several months, Global
Crossing and AGX have been negotiating to resolve all claims
against one another and their subsidiaries and establish the
contractual basis for a continuing commercial relationship.
The Settlement Agreement has two phases, namely:
-- In phase 1, the parties will mutually release their claims
and terminate all exclusivity, non-compete and non-
solicitation restrictions contained in their agreements.
AGX will pay Global Crossing $2,500,000, and the parties
will continue to provide services to each other.
-- In Phase 2, the parties will execute definitive agreements
concerning the provision of services to each other and AGX
will pay an additional $2,000,000 to Global Crossing,
$1,000,000 of which will be paid after execution of the
documents and $1,000,000 after meeting certain milestones.
The salient terms of the settlement agreement are:
A. Access to the Network: As part of the Transition Services,
Global Crossing will continue to allow AGX to access
certain of Global Crossing's systems until the later of the
mutually agreed on time specified in the Settlement
Agreement and April 15, 2003. Thereafter, if AGX
transition is not complete, Global Crossing will continue
to provide information and services to AGX until the
transition is complete provided that AGX cooperates in, and
is capable of, receiving this information, and will
reasonably cooperate and assist AGX to ensure that all
information and services are complete, accurate, and in a
format reasonably accessible to AGX.
B. Interim Services: Global Crossing will continue to provide
network services to AGX, including billing and financial
support services, and maintain insurance for AGX, until the
earlier of:
-- the date on which AGX can provide these services for
itself; and
-- July 31, 2003.
For the months of November and December 2002, the cost of
the interim services will be $460,000 per month, plus an
additional $40,000 per month in reimbursement of insurance
premiums. Beginning in January, the agreed charge for
interim services will depend on AGX's actual usage of these
services, but will be no more than $460,000 and no less
than $350,000. To the extent that the charges in any month
are less than $460,000, up to $110,000 can be used by AGX
as a credit for access services on Global Crossing's
Network. Similarly, once AGX has its own insurance, up to
an additional $40,000 per month can be used by AGX as a
credit for access services on Global Crossing's Network.
The maximum monthly amount of this credit, however, cannot
exceed $150,000. Global Crossing will cooperate with AGX
to enable AGX to operate its own financial and billing
systems.
C. Telecommunications Services: AGX and Global Crossing agree
to provide telecommunications services to each other until
December 31, 2003. Any new circuits purchased by either
party could have up to a 12-month term. Each party will
pay for these telecommunication services 30 days in advance
and provide a 90-day security deposit for all services
provided through third-party providers. After either party
emerging from bankruptcy, mutually agreed market-based
payment terms will apply to services purchased.
D. Existing Services: As of January 1, 2003, Global Crossing
and AGX will begin invoicing each other for all existing
services. Charges for services provided prior to
January 1, 2003 are mutually released under the Settlement
Agreement.
E. Non-Compete and Exclusivity: The parties will mutually
release all non-compete and exclusivity conditions, subject
to AGX and Global Crossing continuing to honor their
confidentiality obligations.
F. The Maintenance Agreement with Global Marine Systems Ltd.:
AGX agrees to continue to purchase maintenance services
from Global Marine Systems Ltd. pursuant to that certain
Marine and Maintenance Services Agreement between East Asia
Crossing and Global Marine Systems Ltd., dated July 22,
2002, for a one-year term effective March 1, 2003. The
payments for the contract term will be $9,000,000 plus a
$2,500,000 deferral payment payable, under certain
circumstances, at the end of the contract term. In
addition, Global Marine Systems Ltd. will have a right of
first refusal to extend the agreement for a second year at
market price. AGX will cooperate with Global Marine
Systems Ltd. to obtain a maintenance contract with Pacific
Crossing Ltd.
G. EAC Credits: AGX will provide Global Crossing with a
$3,000,000 credit and a 30% discount, up to $10,000,000, on
market based prices for services on East Asia Crossing's
subsea network. This credit and discount will be available
to Global Crossing after substantial completion of the
transition and separation of AGX.
H. The Definitive Agreements: The parties will negotiate in
good faith to enter into definitive agreements, including a
Master Services Agreement, a Carrier Service Agreement, an
Amendment to the Maintenance Agreement, a Capacity Purchase
Agreement, and a Transition and Separation Agreement, to
carry out the terms of the Settlement within four weeks of
the order approving this Settlement Agreement becoming a
final order.
I. Intellectual Property Issues: Global Crossing agrees that,
for a period of three years, it will not use, enter into
any agreement or license, with any other person or entity
that would provide the person or entity the right to use,
the name "Asia Global Crossing Limited." AGX may continue
to use the name or mark "Asia Global Crossing Limited"
until June 30, 2003, and will, thereafter be precluded from
using this name or mark or similar or related name or mark.
In addition, AGX agrees to a disclaimer for 180 days after
June 30, 2003 to be inserted on any formal contracts and
sales or marketing materials to the effect that AGX is not
affiliated with Global Crossing or its subsidiaries or
affiliates. AGX may also use letterhead and business cards
with the "Asia Global Crossing Limited" name through
August 1, 2003, for so long as AGX continues to use
reasonable commercial efforts to remove these materials.
J. Assignment: Either party may assign the Settlement
Agreement to its investors or an entity created in
connection with its purchase agreement for so long as its
investors have executed an Investor Letter Agreement and
the entity is capable of and assumes all of the obligations
of the assignor. Either party may also assign the
Settlement Agreement to a third party so long as they
obtain prior written consent from the other, which consent
will not be unreasonably withheld, delayed or conditioned.
Notwithstanding an assignment of the Settlement Agreement,
both the assignor and the assignee will be bound by the
terms of the "Mutual Limited Release of Claims" of the
Settlement Agreement.
K. Releases: Pursuant to the Settlement Agreement, Global
Crossing and AGX, on behalf of their Chapter 11 estates and
past and current subsidiaries and its and their past and
current subsidiaries, successors and assigns agree to fully
and finally release, acquit, and forever discharge the
other, including the other's Chapter 11 estate and its
subsidiaries, successors and assigns from any and all
claims, demands, obligations, actions, causes of action,
debts, liabilities, costs, expenses, losses, promises,
agreements, controversies, rights and damages arising from
facts, circumstances, or events existing or occurring at
any time prior to or on the date of the Settlement
Agreement, in each case under any legal theory, including
under law, contract, tort, equity, or otherwise, and of
every kind and nature whatsoever, whether currently known
or unknown, foreseen or unforeseen, suspected or
unsuspected, or asserted or unasserted. Moreover, both
parties agree, after the Final Effective Date, to withdraw
any default notices, proof of claim, and payment requests
previously issued through the date of the Settlement
Agreement.
Mr. Basta contends that the Settlement Agreement is fair and
equitable and falls well within the range of reasonableness as it
provides significant benefits to Global Crossing, including:
-- It provides the terms for an ongoing commercial
relationship with AGX. Global Crossing will receive
credits and discounts for future telecommunications
services;
-- It will result in the payment of over $4,500,000 to Global
Crossing;
-- Global Crossing will continue to provide undersea cable
maintenance through its wholly owned subsidiary, Global
Marine Systems, which will result in at least $9,000,000 of
revenue;
-- The Settlement Agreement will avoid lengthy litigation
concerning the validity of Global Crossing's claims against
AGX's non-debtor subsidiaries; and
-- The Settlement Agreement will result in the elimination of
over $1,000,000,000 of prepetition unsecured claims against
Global Crossing and terminate exclusivity, non-compete, and
non-solicitation provisions in the agreements between the
parties.
Mr. Basta asserts that the Settlement Agreement also provides
significant benefits to AGX as it provides the terms for an
ongoing commercial relationship. As a result, AGX's customers
will continue to communicate throughout the world. In addition,
the Settlement Agreement resolves claims against AGX's non-debtor
subsidiaries, which could complicate the sale to Asia Netcom.
Finally, it provides for transition services to AGX so that Asia
Netcom will be able to develop its own back office systems over a
reasonable period of time.
(Global Crossing Bankruptcy News, Issue No. 37, Bankruptcy
Creditors' Service, Inc., 609-392-0900)
GLOBAL CROSSING: Motion To Approve EPIK Settlement Agreement
------------------------------------------------------------
According to Michael F. Walsh, Esq., at Weil Gotshal & Manges
LLP, in New York, EPIK Communications Incorporated agreed to
provide telecommunications services to Global Crossing pursuant
to the Dark Fiber Indefeasible Right of Use Agreement with Global
Crossing Bandwidth Inc. dated June 29, 2001. These services
would expand the reach of the network and enable Global Crossing
to accommodate anticipated traffic growth on the network.
Pursuant to the IRU Agreement, EPIK granted GX Bandwidth an
indefeasible right of use in certain dark fiber on EPIK's
telecommunications network in Florida and across the continental
United States. GX Bandwidth agreed to pay EPIK $40,000,000 for
use of fiber for a 20-year term with an option to renew for up to
ten additional years after expiration of the IRU Agreement term.
On June 30, 2001, in accordance with the IRU Agreement, GX
Bandwidth paid EPIK $40,000,000 via wire transfer.
Mr. Walsh adds that Global Crossing agreed to provide
telecommunications services to EPIK, which would enable EPIK's
customers to connect indirectly to EPIK's network by connecting
through Global Crossing' facilities in areas, which would
otherwise be beyond the reach of EPIK's network. Global Crossing
agreed to provide these services to EPIK pursuant to the Capacity
Purchase Agreement, by and among EPIK and GX Bandwidth, dated as
of June 29, 2001. Pursuant to the Capacity Purchase Agreement,
GX Bandwidth sold EPIK capacity on the Debtors' network for
routes from the U.S. to various South American countries. EPIK
agreed to pay Global Crossing $40,000,000 for use of this
capacity for a term of 20 years with an option to extend those
rights under certain circumstances. On July 3, 2001, in
accordance with the Capacity Purchase Agreement, EPIK delivered a
check amounting to $40,000,000 to GX Bandwidth.
Since the execution of the Agreements, disputes arose between the
Debtors and EPIK with respect to GX Bandwidth's obligations under
the IRU Agreement and EPIK's obligations under the Capacity
Purchase Agreement. As a result, neither GX Bandwidth nor EPIK
has activated any network capacity on the Debtors' network or
EPIK's network.
Due to changes in the telecommunications market and the revised
business plan, Mr. Walsh contends that the Debtors do not require
the capacity they purchased from EPIK. Additionally, several
other factors reduce the Debtors' desire to use the capacity
under the IRU Agreement. Significantly, the Debtors believe that
EPIK would be unable to meet or would be severely constrained in
meeting their delivery obligations under the IRU Agreement.
Specifically, EPIK has no significant dark fiber outside the
states of Florida and Georgia because its major suppliers of
capacity outside the Florida and Georgia areas, including Enron
Corp., and Velocita Corp. filed for bankruptcy, and ceased
providing these services to EPIK. Mr. Walsh adds that the
Debtors would be required to spend significant capital
expenditures estimated at $17,000,000 to purchase the equipment
and transmission facilities necessary to use the IRUs capacity.
Further, the Debtors may be required to lay additional fiber
between an EPIK point of presence and the nearest Global Crossing
point of presence in order to put the EPIK dark fiber into
service. Lastly, the Debtors would be required to pay operation
and maintenance charges ranging from $640,000 per year to
$2,300,000 per year contingent on the routes made available on
EPIK's network.
On September 27, 2002, Mr. Walsh recounts that EPIK filed a proof
of claim for $114,000,000 against GX Bandwidth. Additionally, on
October 11, 2002, EPIK filed three proofs of claim each for
$114,000,000 against Global Crossing Venezuela B.V., GC SAC
Argentina S.R.L., and SAC Brasil LTDA. The Claims state that
EPIK filed these claims on a protective basis to protect any
rights it might have in the event that Bandwidth refuses in some
way to honor EPIK's purchase of capacity on the Debtors' network.
Further, the Claims state that the cost of replacing the IRUs
EPIK has purchased from GX Bandwidth and any other damages it
might suffer should GX Bandwidth refuse to honor its obligations
under the Capacity Purchase Agreement is $114,000,000.
The Debtors and EPIK have entered into settlement negotiations to
provide for the resolution of potential disputes relating to the
parties' rights and performance obligations under the Agreements.
After arm's-length negotiations, GX Bandwidth and EPIK agreed to
the terms of a settlement, which will terminate the Agreements
and provide for mutual releases of all claims. By this motion,
the Debtors ask the Court to approve the Settlement Agreement,
which resolves all claims and issues between the parties.
The salient terms of the Settlement Agreement are:
-- The parties agree to immediately terminate the Agreements
and the obligations and liabilities of both parties;
-- The parties agree to release, discharge and acquit each
other and their current and former officers, employees,
agents successors and assigns from any and all claims and
demands whatsoever, accrued or unaccrued, known or unknown,
in law or equity, which any party has or may have arising
out of the Agreements; and
-- EPIK will withdraw the Claims.
Mr. Walsh insists that the Settlement is fair and equitable and
falls well within the range of reasonableness because:
-- the Debtors do not require the capacity they purchased from
EPIK;
-- the Settlement Agreement avoids potential litigation
between the Debtors and EPIK with respect to EPIK's claims
in the Debtors' Chapter 11 cases;
-- by entering into the Settlement Agreement, the Debtors will
avoid paying costly operation and maintenance charges on
the routes made available to the Debtors on EPIK's network;
and
-- the Debtors will avoid paying $17,000,000 for transmission
equipment and facilities necessary to use the IRUs under
the IRU Agreement.
(Global Crossing Bankruptcy News, Issue No. 37, Bankruptcy
Creditors' Service, Inc., 609-392-0900)
GLOBAL CROSSING: Seeks Approval of Interconexion Agreement
----------------------------------------------------------
The GX Debtors seek approval of the Settlement Agreement with
Interconexion Electrica S.A.-E.S.P. to resolve the disputes
between the parties.
Michael F. Walsh, Esq., at Weil Gotshal & Manges LLP, in New
York, informs the Court the GX Debtors and Interconexion
Electrica S.A.-E.S.P. are party to a certain Turnkey Backhaul
Construction, Maintenance and IRU agreement dated as of November
15, 2000 and a keep-well letter, dated as of November 15, 2000.
The Construction Agreement provides for Interconexion to build a
terrestrial network for the GX Debtors in Colombia and for the GX
Debtors to grant Interconexion an indefeasible right of use on
this network.
Mr. Walsh relates that the GX Debtors have made payments to
Interconexion totaling $16,707,925 and are obligated for an
additional $4,568,075. The $4,568,075 does not include
$2,000,000, which Interconexion claims is outstanding but the GX
Debtors dispute. The Colombia Network is substantially complete.
However, the Colombia Network is not connected to the GX Debtors'
Network and the GX Debtors have not made any use of the Colombia
Network. Moreover, the GX Debtors have determined that they will
not have a use for the Colombia Network in the foreseeable
future.
Following extensive arms-length negotiations, the Debtors and
Interconexion reached a settlement agreement, which provides for:
(i) termination of the Construction Agreement and Keep-Well
Letter;
(ii) title to the Colombia Network remaining with
Interconexion;
(iii) the Debtors' retention of an option to require
Interconexion to enter into a new construction
Agreement;
(iv) Interconexion's waiver of its claims against the
Debtors;
(v) the Debtors' waiver of their claims against
Interconexion;
(vi) the allocation of certain proceeds among the Debtors and
Interconexion in the event of a sale; and
(vii) mutual releases.
The salient terms of the Settlement Agreement are:
A. The Agreement and Keep-Well Letter are terminated without
liability or obligation of any party.
B. All rights, title, and interest in the Property will remain
with Interconexion, free and clear of any claims and
interests. Interconexion will have the right to use, sell,
lease or otherwise dispose of the property without any
obligation or liability to the Debtors.
C. All right, title, and interest in the Property will remain
with Interconexion, free and clear of any claims, except
that any use by Interconexion of the Property during the
Term will be subject to the Debtors prior written approval.
D. At any time during the Term, the Debtors have the option to
require Interconexion to enter into an agreement which is
materially equivalent to the Construction Agreement after:
(i) 90 calendar days notice to Interconexion;
(ii) the lump sum payment to Interconexion of $5,327,489
plus $210,000 per year calculated from July 20, 2001;
(iii) the lump sum payment to Interconexion of $7,500 per
month plus applicable VAT and stamp taxes calculated
from July 20, 2001; and
(iv) the payment to Interconexion of the amount to
complete the Work.
E. Interconexion will offer the Debtors the right of first
refusal in the event that Interconexion receives a bona
fide offer for the Property.
F. During the Term, Interconexion will use its reasonable and
diligent efforts to sell, lease or dispose of or transfer
the Property for value to be allocated to both
Interconexion and the Debtors in accordance with the
Settlement Agreement.
Mr. Walsh asserts that the Settlement Agreement is a fair
resolution of the outstanding issues between the parties and is
in the best interests of the Debtors' estates. The Debtors have
determined, in their business judgment, that they have no need
for the Colombia Network at the present time. Pursuant to the
Construction Agreement, the Debtors are obligated to
Interconexion for an additional $4,568,075. Moreover,
Interconexion asserts that it is owed $2,000,000, in addition to
the $4,568,075, which the Debtors dispute. Were the Debtors to
assume the Construction Contract, Mr. Walsh states that they
would be required to pay a cure amount of $4,568,075, plus settle
Interconexion's additional $2,000,000 claim, in order to retain a
terrestrial network for which they have no use at the current
time. Moreover, because the Columbia Network is not connected to
the Debtors' Network, assuming the Construction Agreement would
require the Debtors to incur substantial further costs to connect
the Columbia Network to the Network. Rejecting the contract is
not an attractive alternative as it would result in the
definitive loss of the $16,707,925 already paid to Interconexion
for the Colombia Network.
Pursuant to the Settlement Agreement, the Debtors:
(i) eliminate any future payment obligations to
Interconexion;
(ii) retain an option to reinstate the Construction Agreement
should the Debtors have a need for the Colombia Network;
and
(iii) receive a portion of the proceeds in the event
Interconexion sells the SAC IRU.
By retaining an option to reinstate the Construction Agreement,
the Debtors have essentially extended the time they have to
decide whether to pay the outstanding amounts under the
Construction Agreement and to take possession of the Columbia
Network.
(Global Crossing Bankruptcy News, Issue No. 37, Bankruptcy
Creditors' Service, Inc., 609-392-0900)
GLOBAL CROSSING: Seeks Teleglobe Settlement Agreement Approval
--------------------------------------------------------------
Paul M. Basta, Esq., at Weil Gotshal & Manges LLP, in New York,
relates that the GX Debtors are party to six agreements with
Teleglobe USA, Incand Teleglobe, Inc. relating to the provision
of telecommunications services. On May 28, 2002, Teleglobe USA,
together with certain affiliates, filed a voluntary petition for
relief under the Bankruptcy Code in the United States Bankruptcy
Court for the District of Delaware. On May 15, 2002, Teleglobe
Inc., together with certain of its affiliates, commenced a
proceeding under the Canadian Companies' Creditors Arrangement
Act in the Ontario Superior Court of Justice.
Mr. Basta admits that there are numerous amounts owing under the
Agreements from both the GX Debtors to Teleglobe and from
Teleglobe to the GX Debtors. Following extensive arms-length
negotiations, the GX Debtors and Teleglobe have reached a global
settlement agreement that provides for mutual releases and the
resolution of all claims relating to the Agreements. By this
Motion, the GX Debtors seek approval of the Settlement Agreement.
The GX Debtors and Teleglobe are party to these Agreements:
(i) Telecommunications Services Agreement dated December
1996;
(ii) Telecommunications Services Agreement dated October
1996;
(iii) Telecommunications Services Agreement entered into on
March 12, 2001;
(iv) Carrier Wholesale Service Agreement dated July 29, 1997;
(v) International Private Line Service Order Forms; and
(vi) Carrier Services Agreement dated July 24, 2002.
Pursuant to the Services Agreements, Mr. Basta explains that
Teleglobe and Global Crossing agreed to provide each other with
certain telecommunications services, including private line and
voice carrier services. Under the Carrier Services Agreement,
Global Crossing provides capacity to Teleglobe, including a 10
Gbps wavelength between London and New York. In addition,
pursuant to the Carrier Services Agreement Global Crossing
granted Teleglobe an option to purchase an indefeasible right of
use in one 10 Gbps wavelength of capacity between London and New
York. The initial price of the Carrier Services Agreement was
$2,200,000, to be paid in monthly installments of $67,000 per
month, inclusive of monthly maintenance charges. To exercise the
Conversion Option, Teleglobe is required to make a lump-sum
payment of the difference between $2,200,000 and the amounts paid
under the Carrier Services Agreement. To date, Teleglobe has
made four payments for a total of $268,000.
As of March 7, 2003, the Debtors are indebted to Teleglobe under
the Service Agreements for:
(i) $1,015,401.92 for services rendered before the Global
Crossing Petition Date; and
(ii) $6,583,323.57 for services rendered after the Global
Crossing Petition Date.
On the other hand, Teleglobe is indebted to the Debtors under the
Service Agreements for:
(i) $3,066,747.15 for services rendered before the Teleglobe
Petition Date; and
(ii) $3,881,365.90 for services rendered after the Teleglobe
Petition Date.
These amounts are exclusive of the $1,932,000 that Teleglobe
would be required to pay the Debtors to exercise the Conversion
Option.
On February 24, 2003, after extensive arms-length negotiations,
the Debtors and Teleglobe executed the Settlement Agreement. The
salient terms of the settlement are:
A. Both the Debtors and Teleglobe agree to relief for each
other from the automatic stay of Section 362(d) of the
Bankruptcy Code in the other's Chapter 11 case to
effectuate the terms of the Settlement Agreement.
B. The Debtors and Teleglobe have executed a capacity purchase
agreement, pursuant to which Teleglobe will exercise the
Conversion Option. The annual maintenance fee will be
$90,000 per year.
C. Within ten calendar days of the latest to occur of approval
of this Agreement by the Bankruptcy Court in the Debtors'
Chapter 11 cases, the Delaware Bankruptcy Court in
Teleglobe's Chapter 11 cases, and the Monitor, Teleglobe
will pay to Global Crossing $1,281,387.56 in cash, in full
satisfaction, settlement, release, and discharge of all
amounts due as of the Effective Date under the Agreements
and the Capacity Purchase Agreement, including the exercise
of the Conversion Option.
D. Both the Debtors and Teleglobe will endeavor in good faith
to file appropriate pleadings in their Chapter 11 cases
seeking approval of the Settlement Agreement. In addition,
Teleglobe will endeavor in good faith to cause the Monitor
to approve this agreement not later than the date of
approval of the Settlement Agreement by the Delaware
Bankruptcy Court.
E. As of the Effective Date, both the Debtors and Teleglobe
fully and forever irrevocably release one another and all
their present and former parent corporations and
subsidiaries, officers, directors, employees, agents,
representatives, attorneys, advisors, partners, successors,
and assigns from any and all claims relating to the
Agreements, except for claims relating to the Debtors' and
Teleglobe's ongoing performance obligations under the
Capacity Purchase Agreement and any other Agreements still
in effect as of the Effective Date.
Mr. Basta asserts that the Settlement Agreement is a fair
resolution of the disputes between the parties and in the best
interests of the Debtors' estates. The Debtors and Teleglobe
have numerous claims against each other relating to the
Agreements. The Settlement resolves those claims without any
payment being made by the Debtors. On the contrary, pursuant to
the Settlement Agreement, the Debtors will receive a lump sum
payment of $1,281,387.56 from Teleglobe within ten days of the
effective Date. Moreover, because Teleglobe will execute the
Conversion Option pursuant to the Settlement Agreement, the
Debtors will benefit from the continued income stream of $90,000
per year arising from the maintenance payments from Teleglobe
under the Capacity Purchase Agreement.
(Global Crossing Bankruptcy News, Issue No. 37, Bankruptcy
Creditors' Service, Inc., 609-392-0900)
GLOBAL CROSSING: Examiner To Allow Filing Of Interim Reports
------------------------------------------------------------
By this motion, the Examiner requests an order be entered
providing that:
(i) the Examiner will file periodic Interim Reports not later
than every 90 days until the audits of the GX Debtors'
consolidated financial statements as of and for the years
ended December 31, 2002 and 2001, the restatements, if
any, of any further financial statements, and any further
duties of the Examiner are complete; and
(ii) that the Examiner will, following the completion of these
responsibilities, file a Final Report.
David S. Elkind, Esq., at Reboul MacMurray Hewitt & Maynard, in
New York, tells the Court that immediately following entry of the
order approving the appointment of the Examiner on November 25,
2002, the Examiner began his efforts to engage Grant Thornton to
audit the consolidated financial statements of Global Crossing
and subsidiaries as of and for the years ended December 31, 2002
and 2001. Grant Thornton has committed a large number of
personnel and significant resources in an effort to complete the
audits as expeditiously as possible, to the extent that the
completion of the audits is within the control of Grant Thornton.
At present, Grant Thornton has 30 professionals assigned to the
audit process in the United States, at Global Crossing's
locations in Madison, New Jersey; Detroit, Michigan; Rochester,
New York; and 20 professionals assigned to the audit process in
Europe at Global Crossing's locations in Dublin, Ireland;
Chelmsford, United Kingdom; Basingstoke, United Kingdom. During
the months of December 2002 and January 2003 alone, more than 56
professionals of Grant Thornton and its affiliates abroad devoted
in excess of 4,750 hours to the ongoing audit process.
Mr. Elkind reports that the Examiner and Grant Thornton have been
working closely with the Audit Committee, which has actively
supervised and assisted Grant Thornton in connection with the
audits. The Examiner and Grant Thornton have had the full
cooperation of the Audit Committee, and the Audit Committee has
actively assisted the Examiner and Grant Thornton in developing
audit strategy and resolving issues as they arise. Since their
appointments, the Examiner and Grant Thornton have formally met
with the Audit Committee once every two weeks. Between formal
meetings, the Examiner and Grant Thornton have been in regular
communication with the Audit Committee Chairman.
At the time the Examiner was appointed and Grant Thornton was
engaged, Grant Thornton developed its timetable for work on the
audits on the basis of a number of critical assumptions which
were agreed to by Global Crossing's senior management and the
Audit Committee and which were outlined in Grant Thornton's
original proposal and engagement letter. Those assumptions
included:
-- It was assumed that Grant Thornton would conduct the audits
for the years ended December 31, 2002 and 2001 to the
maximum extent possible on a simultaneous basis.
-- Global Crossing senior management and the Audit Committee
advised Grant Thornton and the Examiner of their
understanding from Arthur Andersen, that the audit for the
year ended December 31, 2001 had not only been commenced by
Arthur Andersen but that it was 85% complete at the time
the work on that audit was discontinued by Arthur Andersen.
-- Grant Thornton was to be granted full access to Arthur
Andersen's working papers prepared in connection with its
audits of Global Crossing for the years ended December 31,
2001 and 2000. In addition, Arthur Andersen was to provide
Grant Thornton with full access to its permanent files and
all working papers prepared in connection with its review
of Global Crossing's 2001 quarterly filings and other SEC
filings.
-- Global Crossing senior management and the Audit Committee
advised Grant Thornton and the Examiner their understanding
from AGX management, that PricewaterhouseCoopers LLP, the
independent accountants for AGX, a majority-owned
subsidiary consolidated through November 17, 2002, would
perform the audits of AGX for the years ended December 31,
2002 and 2001, that Grant Thornton would have access to and
could rely on those audits in performing the audits of the
consolidated financial statements of Global Crossing for
those years, and that Grant Thornton would not be required
to perform separate audits for AGX in order to audit Global
Crossing's consolidated financial statements. In addition,
PWC would provide Grant Thornton with full access to its
working papers prepared in connection with its reviews of
AGX's 2002 and 2001 quarterly filings.
-- It was understood that there would be ongoing contact with
management of Global Crossing and historical financial
records would be accessible. In addition, Global Crossing
personnel would provide Grant Thornton with the schedules,
analyses and documentation which Grant Thornton required
after commencement of the audits, and would provide Grant
Thornton with drafts of the 2002 and 2001 Forms 10-K and
financial statements, including related footnotes.
Since commencing its work on the audits, Mr. Elkind tells the
Court that the Examiner, Grant Thornton, the Audit Committee, and
Global Crossing senior management have determined that certain of
these assumptions have proven to be inaccurate. Grant Thornton,
the Examiner, the Audit Committee, and Global Crossing senior
management have encountered a number of developments which have
significantly delayed progress on the audits. The matters that
have arisen have been due to problems beyond the control of the
Audit Committee, which has in all instances been of great
assistance to the Examiner and done its best to deal with the
matters. The most significant matters affecting the completion
of the audits are:
-- Contrary to the representations made to the Examiner, Grant
Thornton, Global Crossing senior management and the Audit
Committee, it is apparent that Arthur Andersen's audit of
Global Crossing's financial statements for the year ended
December 31, 2001, was not close to 85% complete, and the
workpapers provided to Grant Thornton by Arthur Andersen
for the audits of the 2001 and 2000 financial statements
have been of limited use. The workpapers that have been
made available to date have been disorganized, delayed,
incomplete, and substantial portions of the workpapers have
either not been produced or do not exist.
-- Grant Thornton had understood that PWC would conduct the
audits of Asia Global Crossing as of and for the years
ended December 31, 2002 and 2001. It was anticipated that
Grant Thornton, as part of its audit of Global Crossing,
would have access to and rely on the work of PWC in
connection with PWC's audits of Asia Global Crossing as of
and for the years ended December 31, 2002 and 2001. Given
the loss of control that led to the deconsolidation of AGX,
however, Global Crossing is not in a position to assure
that result. Currently, it is unresolved how the lack of
audited financial statements for AGX as of and for the
years ended December 31, 2002 and 2001, will be resolved.
Grant Thornton, the Audit Committee and Global Crossing
senior management are considering the various options
available.
-- While Global Crossing's management have been doing their
best to assist Grant Thornton in the conduct of the audits,
they have also had other demands on their time as the
result of ongoing litigation, the bankruptcy process,
regulatory inquiries and other demands resulting from the
transaction with Global Crossing's new investors. As a
result, Global Crossing management and internal accounting
personnel have had competing obligations that have diverted
some staff time and attention from Grant Thornton's work.
-- In addition, the timetables for completion of the audits of
GX as of and for the years ended December 31, 2002 and 2001
are further impacted by the necessity to review certain
identified matters with the SEC. GX senior management is
still in the process of determining in what form it will
seek the SEC's review of these matters and it has indicated
that it will consult with Grant Thornton in connection with
its proposed approach.
As a result, the Examiner and the Debtors recognize that the
audits of the consolidated financial statements of the Debtors
are ongoing, and that the audits cannot be completed until
certain matters are resolved, which the Examiner, Grant Thornton
and the Debtors are undertaking to do.
(Global Crossing Bankruptcy News, Issue No. 37, Bankruptcy
Creditors' Service, Inc., 609-392-0900)
GLOBAL CROSSING: ITXC Seeks To Lift Stay To Effectuate Setoff
-------------------------------------------------------------
Bruce Beuchler, Esq., at Lowenstein Sandler P.C., in New York,
recounts that on February 22, 2001, ITXC and Global Crossing
Telecommunications, Inc. entered into a Master Services Agreement
pursuant to which ITXC provided GX Telecommunications with
telecommunications services. ITXC also entered into a contract
with Global Crossing Bandwidth, Inc., dated April 13, 2001,
pursuant to which GX Bandwidth provided ITXC with
telecommunications services. The Master Services Agreement
between ITXC and GX Telecommunications expressly provides for the
right of setoff.
During a telephone call conducted on November 16, 2001 between
Global Crossing and ITXC, Mr. Buechler alleges that the parties
agreed that they had the mutual right to setoff obligations by
and between both GX Telecommunications and GX Bandwidth and ITXC.
This was confirmed in a subsequent telephone conference call of
the parties on January 24, 2001. The GX Debtors specifically
requested ITXC send additional telecommunications traffic to the
GX Debtors to reduce ITXC's net receivable balance. ITXC did in
fact send additional telecommunications traffic to the GX Debtors
as a result. Prior to the Petition Date, ITXC is not aware of a
written memorialization of these conversations.
The GX Debtors owe ITXC for $562,818.20 on account of prepetition
telecommunication services provided by ITXC to Global Crossing.
ITXC is indebted to the GX Debtors for $196,230.90 on account of
prepetition telecommunication services provided. Accordingly,
ITXC seeks relief from the automatic stay to effectuate a setoff
of the prepetition claims between the parties.
Mr. Buechler contends that there was an intent and agreement
between ITXC and the Debtors after the parties entered into the
two underlying agreements to allow setoff. Further, the Master
Services Agreement expressly provides for the right of setoff.
The other agreement, the Carrier Services Agreement between ITXC
and GX Bandwidth, states that it was entered into by GX Bandwidth
"on behalf of itself and its affiliates that may provide a
portion of the services hereunder." The Carrier Services
Agreement does not expressly prohibit or provide for a right of
setoff.
Mr. Buechler points out that the course of dealings between ITXC
and the Debtors demonstrate that there was a clear intention to
treat the related entities as one for the purposes of setoff in
connection with their business transactions with ITXC.
Prepetition, the Debtors engaged in discussions with ITXC
concerning netting or setting off the prepetition amounts owed by
and between them. The Debtors explicitly suggested that ITXC run
additional service through GX Bandwidth as one way of reducing
ITXC's accounts receivable exposure. The parties then agreed to
setoff debts by and among the two separate contracts, but did not
have an opportunity to reduce their agreement to writing prior to
the Petition Date.
Mr. Buechler tells the Court that the two agreements can be read
in conjunction and clearly contemplate each party purchasing
telecommunications services from the other. Additionally, the
fact that GX Bandwidth entered into the Carrier Services
Agreement "on behalf of itself and its affiliates" supports the
contention that GX Bandwidth knew it and its affiliates
relationship to be all but transparent when dealing with ITXC.
Further, in the conversations between the parties, the Debtors
agreed to setoff amount prepetition. These facts demonstrate the
parties clear intention to treat each other as related entities
and to permit setoff. When there is an intent to treat two
entities as one, mutuality is satisfied. See, Matter of
Fasano/Harris Pie Co., 43 B.R. 464 (Bankr. W.D. Mich. 1984),
aff'd, 70 B.R. 285 (W.D. Mich. 1987); In re Petroleum Co., 95
B.R. 404 (Bankr. W.D. LA 1988).
More recently, the court in In re Telephone Warehouse, Inc., 259
B.R. 64 (Bankr. D. Del. 2001), held that the mutuality
requirement was satisfied in connection with debts owed by and
between multiple wireless communication providers and multiple
debtors in jointly administered Chapter 11 cases. In Telephone
Warehouse, the debtors were several related retailers of cellular
wireless products. The debtors purchased cellular telephone s
and accessories and resold the phones together with
telecommunication services which were purchased from wireless
service providers. When the debtors filed for bankruptcy, there
were various amounts due by and between the debtors and the
wireless service providers. The court held that although there
were separate contracts between the parties with regard to the
sale of cellular telephones and accessories, and the provision of
telecommunication services, that "all sums due between the
parties are part of a single integrated transaction..."
ITXC anticipates that the Debtors will assert that because the
Carrier Services Agreement between ITXC and GX Bandwidth does not
provide for a right of setoff, that setoff is not permitted. Mr.
Buechler asserts that this argument is incorrect. The Carrier
Services Agreement is controlled by New York State law. Whether
ITXC has a right of setoff is a matter of state law. Telephone
Warehouse, 259 B.R. at 68; In re Hunt, 250 B.R. 482, 485 (Bankr.
E.D. N.Y. 2000) (construing New York State law, the court held
that it must analyze state law in determining whether a setoff
would be permitted).
Mr. Buechler points out that New York State law expressly
provides for a right of setoff under New York Debtor Creditor Law
Section 151. Thus, under the statute, as long as a contract does
not prohibit a right of setoff, a right of setoff exists under
New York State law. As noted by the court In Re McLean
Industries, Inc., 90 B.R. 614, 618 (Bankr. S.D.N.Y. 1988),
"setoff does not depend on parties having contractually agreed to
the right." In contrast, setoff rights were denied to exist
where their exercise would conflict with an express agreement
between the parties. In the relationship between ITXC and GX
Bandwidth, there is no prohibition. In addition, as noted by the
Second Circuit Court of Appeals, "[t]here is also no question
that New York has long recognized a common law right of setoff."
Bennett Funding, 146 F.3d at 139. Thus, under applicable New
York law, there is both a statutory and common law right of
setoff. Therefore, ITXC has the right of setoff under New York
State law.
The Bankruptcy Code requires the Court to grant relief from the
automatic stay for "cause." Allowing for the proper exercise of
setoff rights constitutes "cause" for relief from the automatic
stay because "[t]he automatic stay, however, does not defeat the
right of setoff; rather, setoff is merely stayed pending an
orderly examination of the debtor's and creditor's rights."
Matter of Corland Corp., 967 F.2d 1069, 1076 (5th Cir. 1992).
Accordingly, ITXC has demonstrated cause to be entitled to relief
from the automatic stay to effectuate a setoff of mutual
obligations between Global Crossing and ITXC.
(Global Crossing Bankruptcy News, Issue No. 37, Bankruptcy
Creditors' Service, Inc., 609-392-0900)
GLOBAL CROSSING: BNY Seeks To Lift Stay To Disburse Funds
---------------------------------------------------------
The Bank Of New York, as successor Indenture Trustee under an
Indenture dated October 12, 2000 between Asia Global Crossing
Ltd. and the United States Trust Company of New York, moves this
Court for an Order:
(i) modifying the automatic stay, to the extent applicable,
to permit the Indenture Trustee under the Indenture
governing the 13-3/8% senior notes issued by Asia Global
Crossing Ltd. to disburse $27,285,000 presently held
subject to the terms of the Indenture by the Indenture
Trustee for the benefit of the holders of record as of
November 12, 2002, of the Notes;
(ii) releasing the Indenture Trustee from any potential
liability for making the Disbursement; and
(iii) for any other and further relief which to this court may
deem just and proper.
Glenn E. Siegel, Esq., at Dechert LLP, in New York, explains that
pursuant to the Indenture, Noteholders are entitled to semi-
annual interest payments. An interest payment came due, but was
not paid, on October 15, 2002. After negotiation with certain
holders of the Notes, pursuant to an agreement among the parties,
on October 28, 2002, AGX paid $27,285,000 to the Indenture
Trustee, to be held in trust for the sole benefit of the
Noteholders until the earliest possible date on which the
Disbursement could be made. The Disbursement date was set as
November 22, 2002, due to a provision of the Indenture requiring
that a "special record date" be established with respect to any
late interest payment -- even one less than two weeks late, as
was the case here.
Following the Petition Date, on November 21, 2002, Mr. Siegel
recounts that the Indenture Trustee informed the Noteholders
that, due to AGX's bankruptcy filing, it would not make the
Disbursement on November 22. The Indenture Trustee continues to
hold the Funds pursuant to the terms of the Indenture for the
sole benefit of the Noteholders. The Indenture Trustee has
informed the Noteholders that it believes it cannot make the
Disbursement pursuant to the Indenture unless this Court enters
an Order:
(i) modifying the automatic stay imposed pursuant to Section
362 of the Bankruptcy Code, to the extent applicable, to
permit the Disbursement; and
(ii) releasing the Indenture Trustee from any potential
liability for making the Disbursement.
Mr. Siegel insists that the Funds are not property of AGX's
bankruptcy estate. When they were transferred pursuant to the
Indenture to the Indenture Trustee for the sole benefit of the
Noteholders, AGX lost all rights and interests in the Funds, and
the Automatic Stay imposed with respect to property of the AGX
estate is therefore wholly inapplicable to the Funds.
Mr. Siegel believes that the only possible interest that AGX
might assert with respect to the Funds would be through an action
for recovery of the Funds as a preferential transfer under
Sections 547 and 550 of the Bankruptcy Code. The Indenture
Trustee does not believe there is any viable action against it
for its receipt of the Funds; nonetheless, it is conceivable that
AGX might seek to recover the Funds from the Bank of New York as
an "initial transferee" under Section 550 of the Bankruptcy Code.
But even if a preference action could be brought, it is clear
that the Funds are not property of the estate, AGX's transfer of
the Funds was made in the ordinary course of its business -- an
interest payment which came due at a regular interval every six
months over a significant period prior to the Petition Date, and
the Indenture Trustee is a mere conduit for payment of these non-
estate funds. The payment was made within a substantially timely
manner under the applicable grace period.
Since AGX has no interest, even contingent, in the Funds, Mr.
Siegel asserts that there is no possibility for harm to AGX's
estate or its creditors arising from the Indenture Trustee making
the Disbursement. Moreover, the Indenture Trustee believes it is
significant that both AGX and the Official Committee of Unsecured
Creditors have indicated that they do not presently intend to
object to this Motion.
Pacific Crossing Objects
Beth E. Levine, Esq., at Pachulski Stang Ziehl Young Jones &
Weintraub P.C., in New York, argues that the Motion is
procedurally defective because proceedings to obtain declaratory
judgments must be brought as adversary proceedings under the
Federal Rules of Bankruptcy Procedure. If the Court looks beyond
this fundamental procedural defect, the Motion must still be
denied because:
-- the filing of the Motion belies the Indenture Trustee's
assertion that the Funds are not property of AGX's estate;
-- if the Funds are property of AGX's estate, no cause exists
to lift the stay;
-- the Court should not allow AGX to release the Indenture
Trustee from any potential liabilities for disbursing the
Funds, as the transfer of the Funds from AGX to the
Indenture Trustee falls squarely within preferential
transfers avoidable under Section 547(b) of the Bankruptcy
Code; moreover, there is no consideration for the release.
(Global Crossing Bankruptcy News, Issue No. 37, Bankruptcy
Creditors' Service, Inc., 609-392-0900)
GLOBAL CROSSING: PCL Opposes Pursuit of Adversary Proceeding
------------------------------------------------------------
PCL Japan, Ltd. asks that the Court enter an order lifting the
automatic stay Section 362(a) of the Bankruptcy Code to seek
relief from Asia Global Crossing, Ltd. in the adversary
proceeding entitled PCL Japan, Ltd. v. Asia Global Crossing,
Ltd., et al., Case No. 03-51516 (PJW), which is part of the
bankruptcy case entitled In re PC Landing, et al., Case No. 02-
12086 (PJW). Both the adversary proceeding and bankruptcy case
are pending in the United States Bankruptcy Court for the
District of Delaware.
Lawrence C. Gottlieb, Esq., at Kronish Lieb Weiner & Hellman LLP,
in New York, informs the Court that the group of entities known
as "Pacific Crossing" was formed to finance, construct and
operate a submarine, fiber optic cable running between the
western coast of the United States and Japan. This cable, known
as "PC-1," is a crucial element of a telecommunications network
that links East Asia, Japan and the United States. PC-1 comes
ashore at two landing stations located in Japan and two landing
stations on the western coast of the United States. From these
landing stations, the cable is connected to a terrestrial network
in Japan and to networks in the Americas and Europe.
One of these landing stations is located in Shima, Japan. The
Shima Station is comprised of land, a 3,600-square meter building
and equipment. PCL Japan is, and at all relevant times has been,
the exclusive owner of the Shima Station, including its land,
building and equipment.
On May 2, 2002, Mr. Gottlieb alleges that the defendants
purportedly caused a 54% share of the interest in the building at
the Shima Station to be conveyed to East Asia Crossing Japan Inc.
The defendants conceived and directed this purported transfer
from offices maintained by AGX in Los Angeles, California.
PCL Japan never authorized the transfer of any of its interest in
the Shima Station, including the Transferred Interest. In
addition, there are no resolutions of the PCL Japan board of
directors or documents properly executed by officers of PCL Japan
that effectuate the conveyance of the Transferred Interest.
Moreover, PCL Japan received no consideration in exchange for the
Transferred Interest.
A month after this purported transfer, Mr. Gottlieb reports that
AGX, together with its subsidiary East Asia Crossing, Ltd.,
granted a mortgage on the Transferred Interest as security for a
$83,725,000 loan from KDDI. Neither AGX nor East Asia Crossing,
however, had an ownership interest in the Shima Station at this,
or any, time. This mortgage was executed and registered in Japan
without PCL Japan's knowledge, consent or authorization.
PCL Japan commenced an adversary proceeding in the Delaware Court
on March 7, 2003 to reclaim the Transferred Interest. One of the
defendants in the adversary proceeding is AGX, the entity that
conceived, carried out and effectuated the transfer.
Mr. Gottlieb insists that the automatic stay should be lifted
pursuant to Section 362(d)(1) of the Bankruptcy Code and PCL
Japan permitted to commence the adversary proceeding as against
AGX for these reasons:
-- PCL Japan will be severely harmed in its own bankruptcy
case if it is not permitted to commence the adversary
proceeding against AGX because the uncertainty surrounding
the ownership of the Transferred Interest has interfered
with PCL Japan's ability to sell the property;
-- the adversary proceeding involves AGX's fiduciary duties as
a majority shareholder of PCL Japan;
-- the adversary proceeding will result in a complete
resolution of the issues surrounding ownership of the
Transferred Interest; and
-- the adversary proceeding will minimally interfere with
AGX's bankruptcy case.
AGX Objects
Richard F. Casher, Esq., at Kasowitz Benson Torres & Friedman
LLP, in New York, argues that the Motion filed by PCL Japan Ltd.
is replete with baseless allegations of "severe harm" that
purportedly would be suffered by PCL Japan in the event that it
were not granted relief from the automatic stay for the purpose
of seeking relief against the AGX Debtors in an adversary
proceeding entitled PCL Japan, Ltd. v. Asia Global Crossing, Ltd.
et al., Case No. 03-51516 (PJW), pending in the United States
District Court for the District of Delaware. PCL Japan's claim
of "severe harm" does not survive even the most cursory scrutiny.
The ten-count Complaint that PCL Japan seeks permission to
prosecute against the AGX Debtors contain five "claims for
relief" that, on their face, are not cognizable against the AGX
Debtors, but, rather, lie only against third parties. The other
five Claims for Relief either are directed expressly at parties
other than the AGX Debtors or constitute claims for money damages
that PCL Japan is barred from asserting because of it's failure
to file a proof of claim. In short, the Complaint contains
claims for relief that either cannot, as a matter of law or as a
matter of fact, be asserted against the AGX Debtors. Under these
circumstances, PCL Japan cannot show any harm if the Court denies
stay relief.
Even more fundamentally, Mr. Casher notes that the Adversary
Proceeding constitutes a frontal assault on this Court's
jurisdiction to allow and disallow claims against the AGX
Debtors. The PCL Japan Complaint contains two claims for relief
that expressly seek monetary damages against the AGX Debtors
based on a "claim" that arose prepetition. Long-established case
law vests in this Court the authority to allow and disallow
claims against debtors that have cases under title 11 pending
before it. PCL Japan failed to file a proof of claim in the AGX
Debtors' Chapter 11 case; by virtue of the claims bar order
entered by this Court and applicable Bankruptcy Rules, PCL
Japan's purported claims for money damages are barred. By
attempting to obtain relief from the automatic stay for the
purpose of prosecuting those claims against the AGX Debtors
through the vehicle of the Complaint filed with the Delaware
Bankruptcy Court, PCL Japan ignores the injunctive provision of
the claims bar order and, at the same time, attempts to skirt
this Court's unquestioned jurisdiction to allow and disallow
claims against the AGX Debtors.
Mr. Casher tells the Court that the PCL Japan Complaint is part
of a pattern of activity pursued by PCL and the PCL Lenders in
the Delaware Bankruptcy Court that threaten to undermine the
jurisdiction of this Court over its debtors. Indeed, on the very
same day that PCL filed a proof of claim against the Debtors in
this Court, thereby invoking and subjecting itself to the
equitable jurisdiction of this Court to resolve its proof of
claim, PCL filed a motion under Rule 2004 in the Delaware
Bankruptcy Court seeking sweeping discovery from the AGX Debtors,
its financial advisor, its former accountants and its soon-to-be
acquirer, Asia Netcom. The discovery sought by PCL in its Rule
2004 motion and in an earlier Rule 2004 Motion filed in the
Delaware Bankruptcy Court by the PCL Lenders, discovery that is
being aggressively pursued by PCL and the PCL Lenders, addresses
the identical issues raised by the proofs of claim filed by PCL
and the PCL Lenders.
Mr. Casher asserts that PCL Japan's Stay Relief Motion should be
denied summarily. In addition, the Debtors urge this Court to
assert its jurisdiction over the discovery proceedings relating
to the proofs of claim filed by PCL and the PCL Lenders and, in
so doing, bar PCL and the PCL Lenders from proceeding with
duplicative discovery in the Delaware Bankruptcy Court. It is
difficult to imagine a greater and more disruptive interference
with the Debtors' bankruptcy case than the aggressive efforts of
PCL, PCL Japan and the PCL Lenders to undermine the claims
administration process in this case by prosecuting the Adversary
Proceeding against the Debtors and continuing to prosecute the
PCL 2004 Discovery in Delaware.
(Global Crossing Bankruptcy News, Issue No. 37, Bankruptcy
Creditors' Service, Inc., 609-392-0900)
===========
B R A Z I L
===========
EMBRATEL: Plans to Offer New Internet Protocol-based Service
------------------------------------------------------------
Embratel will launch a pilot project for its Voice over IP (VoIP)
services between late April and early May, announced company
executive Leonel Israel during a conference late last week.
Quoting from Mr. Israel's speech, Business News Americas says the
new service is part of the company's strategy to look for new
markets based on IP. The VoIP will be offered by Argentine data
subsidiary, Embratel Internacional, the executive said.
Exactly who will comprise the pilot is, so far, unclear, although
an obvious target would be telcos with a high volume of
international calls, says the paper. The new service offers to
cut cost, without compromising high quality performance.
Mr. Israel admitted the company still needs to complete talks
with equipment providers: "We are talking with Cisco and two
others." He noted that Embratel already has an international
long distance concession in Argentina.
One US-based industry executive, who attended the conference held
in the Dominican Republic, doubted, however, that Embratel could
get the pilot going in a month's time.
"They haven't even signed their equipment deal yet, and then they
will have to decide their customers, and sign the relevant
interconnection agreements. That is a lot to do in one month,"
the executive, who asked not to be named, told Business News
Americas.
Mr. Israel was speaking at the XIII Meeting of International
Traffic in Latin America sponsored by the Ibero-American
carriers' association, Ahciet, the report said.
CONTACT: Embratel Participacoes S.A.
Silvia Pereira, Investor Relations Manager
Phone: 55 21 2121-6474/9662 (messages)
Email: Silvia.Pereira@embratel.com.br
invest@embratel.com.br
IPIRANGA PETROQUIMICA: Pleads for Two-year Debt Moratorium
----------------------------------------------------------
Petrochemicals firm, Ipiranga Petroquimica (IPQ) is reportedly
renegotiating with banking creditors a US$150 million loan, as it
tries to duck from an expected slump in orders for polyethylene
and polypropylene between 2003 and 2004.
According to Business News Americas, the company is negotiating
with a syndicate of 10 banks led by International Finance
Corporation and German development bank, KfW. The paper is not
certain when this debt will mature, but it is accordingly part of
the US$290 million loan taken by the company between 1995 and
1999 to pay for the expansion of its plants at the Triunfo
petrochemicals pole.
This project, the paper says, expanded production from 200,000
tonnes a year to about 700,000 tonnes a year, split into 550,000
tonnes of high and low linear density polyethylene and 150,000t a
year of polypropylene.
IPQ President Paulo Magalhaes told Business News Americas the
company has already replaced US$140 million of the loan with new
securities. The group's total long-term debt is US$500 million,
and debt management costs contributed to the net loss of BRL607
million in 2002.
The paper says the company wants a two-year moratorium, as it
expects weak market performance this year and 2004. The local
economy is expected to grow no faster than 2% a year these two
years, the company says.
For 2003, the company expects to generate cash flow of US$70
million, up from US$50 million in 2002. A stable exchange rate in
Brazil is expected to help the company establish competitive
prices for exports, the paper says.
TELESP CELULAR PARTICIPACOES: TRO Acquisition Finalized
-------------------------------------------------------
Telesp Celular Participacoes S.A. - TCP (NYSE: TCP; BOVESPA:
TSPP3 (Common), TSPP4 (Preferred)) informed its shareholders and
the public in general, under the terms of the CVM Instruction #
358/02, the accomplishment of all the precedent conditions
established in the Share Purchase and Sale Agreement signed by
TCP and the controlling shareholder of Tele Centro Oeste
Participacoes S.A. ("TRO"), subject of the relevant notices
issued on January 16 and March 24 of the current year, including
the previous approval from Anatel (the Brazilian
Telecommunications Agency) for the transfer of controlling shares
of TRO. Therefore, the transaction that will transfer TRO's
control to Telesp Celular Participacoes S.A. is expected to be
concluded during the month of April, 2003.
CONTACT: Telesp Celular Participacoes
Rua Abilio Soares, 409
Paraiso
04005-001 Sao Paulo - SP
Brazil
Phone: +55 11 3059-7081
Fax: +55 11 3059-29
Home Page: http://www.telesp.com.br
Contacts:
Francisco L. Murteira Nabo, Chairman
Miguel A. Igrejas Horta e Costa, Joint Vice Chairman
Norberto Veiga de Sousa Fernandes, Joint Vice Chairman
USIMINAS: Books BRL320 Million First Quarter Net Profit
-------------------------------------------------------
Usiminas, Brazil's largest producer of flat steel, reported a
huge 1,292% jump in net profit for the first quarter this year
compared to last year's figures for the same period, says
Business News Americas. According to the company, first quarter
net profit reached BRL362 million this year, better than last
year's BRL26 million.
The company attributed the big jump to higher domestic sales
buoyed by demand from the automobile sector. The company also
credited a better product mix, which focused more on value-added
steel.
Consolidated net revenue for the quarter increased 60.2% to
BRL2.1 billion, while consolidated EBITDA jumped 153% to BRL882
million, the paper says.
Consolidated crude steel output, meanwhile, rose 10.5% to 2.08Mt,
while consolidated exports during the quarter grew 21.2% to
463,000t, helped by strong demand from China. Export revenues
also benefited from higher prices, it said.
Based in Belo Horizonte, the company owns Sao Paulo-based flat
steel-maker, Cosipa.
CONTACT: Usinas Siderurgicas de Minas Gerais Usiminas PN A
Rua Prof. Jose Vieira de
Mendonca, 3011
Engenheiro Nogueira
31310-260 Belo Horizonte - MG
Brazil
Phone: +55 31 3499-8000
Fax: +55 31 3499-8475
Home Page: http://www.usiminas.com.br
Contact:
Jose Augusto Muller de Oliveira Gomes, Chairman
=========
C H I L E
=========
INVERLINK: Questioning Continues as Scandal Unfolds
---------------------------------------------------
A money manager from Chilean brokerage firm Inverlink Corredores
de Bolsa was held for questioning relates a report from NewsEdge.
Lawrence Fletcher was detained in connection with the
investigation into the scandal involving parent company,
Inverlink, said local paper Estrategia.
Meanwhile, Juan Pablo Prieto from BBVA Chile was released after
being questioned on the scandal.
Inverlink executives were charged of spying on the central bank
and stealing US$100 million worth of CDs from Corfo. SVS Chairman
Alvaro Clarke reportedly tendered his resignation, citing
criticisms relating to the scandal.
INVERLINK: SVS Chairman Pressured By Government to Resign
---------------------------------------------------------
Alvaro Clarke, former securities and insurance regulator of
Chile, SVS, said that his resignation was triggered by political
pressure from the administration of President Ricardo Lagos,
according to a Business News Americas report.
The head of the SVS is a political appointee and can be removed
by the president at whim, and Mr. Clarke's comments on Friday
call into question how much real autonomy the institution enjoys,
said the report.
However, Mr. Clarke related that Christian Democrat party
chairman Adolfo Zaldivar told him Thursday morning that his
direction of the regulatory agency, the SVS, had caused the
government certain "inconveniences." Aid the report.
The official said that he quit because of criticism over the
Inverlink Scandal. Presently, the Company has now gone bankrupt,
and executives were placed under arrest.
According to the report, Inverlink officials were accused of
spying on the central bank and stole over US$100 million in CDs
from industrial development agency Corfo.
Mr. Clarke was known to have accused the government of
threatening the autonomy of the regulator.
"I am not prepared to have my personal prestige, professionalism,
and above all my service as a public employee called into
question," he said.
On Friday, Deputy Finance Minister Maria Eugenia Wagner said that
Mr. Clarke's resignation was intended to calm the market.
===============
C O L O M B I A
===============
INTERACCION SA: Regulator Intervenes Business Due to 'Misdeeds'
---------------------------------------------------------------
Colombia's stock exchange regulator has taken over the operations
of Cali-based stock brokerage, Interaccion SA, to protect
shareholders and a multi-billion-peso fund under its management,
Bloomberg said Friday.
"[We seize it] because we have evidence of serious irregularities
and unreported transactions," acting regulator, Juan Fernando
Lucio, said in a statement, adding, "This is an intervention to
administer it, not liquidate it."
The regulator said it will make a determination within two months
whether to save the company or order its liquidation. The last
time the regulator intervened a business was in 1997, the report
says.
Bloomberg says the company manages a fund valued COP30 billion
(US$10 million), but the regulator ranks it as a small to mid-
sized firm, owning only 1.9% of the assets of Colombia's 42
brokerages.
The brokerage is majority-owned by Venezuelan shareholders
through Cia Financiera Internacional SA, Inversiones SA and
Venezuela's deposit guarantee agency, the report says.
=============
E C U A D O R
=============
PETROECUADOR: Budget Committee Report Out Today
-----------------------------------------------
After failing to come up last week with a consensus as to how
much reduction should be made on the proposed US$1.7 billion
budget of Petroecuador, a budget commission is now tasked to
settle the row.
The commission -- composed of representatives from the economy
ministry, the Board, oil workers union and the central bank -- is
expected to submit its recommendations today. If favorable, the
board could act on the recommendations and approve the budget as
early as Wednesday, says Business News Americas, citing local
daily La Hora.
The budget row has been closely followed by workers, who
threatened to go on strike last week, according to Troubled
Company Reporter-Latin America. The main sticking point is a
US$200 million cut ordered by the ministry. The board, however,
could only manage to identify US$89 million worth of cuts without
seriously affecting production goals. According to the paper,
US$53 million will come from the postponement of a plan by
production unit, Petroproduccion, to buy four drilling rigs,
while the other US$36 million will be cut from operating costs
and salaries.
"It will definitely affect the normal operations of the company,"
a Petroecuador source told Business News Americas, when asked how
the cuts would impact the company. He disclosed that the company
has been operating on a tight budget for the past 10 years.
"We will have to cut new investments and normal operating
expenses, and our production could drop," he added, without
specifying the volume.
Meanwhile, minus the budget, the board and the economy ministry
were able to reach an agreement on some broad guidelines
concerning state and private investment in Ecuador's oil industry
over the next four years.
The board approved Petroecuador plans to call for bids on its
ninth bidding round on April 25 and continue with other projects
over the next few months designed to attract foreign investment
in the oil sector, the report says. The board agreed that the
state's participation in future contracts signed with foreign
companies should be increased from its current average of 17% to
about 40% as a minimum.
"[The board] decided that from now on all of Petroecuador's
contracts with private companies should be managed in the form of
association contracts," the Petroecuador source told Business
News Americas.
Heavily criticized for giving foreign companies too much
participation in previous contracts, the government and the board
will now seek the renegotiation of these contracts, including the
so-called Palo Azul contract inked with Argentina's Pecom Energia
and Chile's state oil company, Enap, last year.
===========
M E X I C O
===========
CFE: Power Reform Bill Threatens Stability, Growth of Sector
------------------------------------------------------------
A senate version of a bill seeking to reform Mexico's power
industry, if turn into law, could result in massive losses and
even blackouts, says state-run energy firm, CFE. The measure --
passed with 61 votes in favor, 27 abstentions and 9 against --
will now go to the lower house for concurrence, Business News
Americas says. According to CFE, the proposed bill, as it stands
now, could cost the company about MXN10.8 billion (US$1 billion)
in revenues during the first year.
Senator Oscar Luebbert Gutierrez, a member of the opposition
Institutional Revolutionary Party, introduced the bill, says
report. It seeks to cut power rates by altering the organic
public federation law, the electric power public service law and
the law governing energy regulator, CRE.
The proposed law will establish a new, simplified rates system
based on factors like temperature index (to reflect the need for
air conditioning in hot parts of Mexico). It also seeks to
monitor power generation, transmission and distribution costs,
and family earnings in low-income sectors. The law also proposes
to stretch daylight saving time to eight months from six in the
warmest and most humid parts of the country.
In effect, the report says, rates will now differ from region to
region depending on the climate and the local economy. Different
income groups will also be charged differently.
CFE says the measure will effectively freeze investment and
growth in the power sector. For its part, it will be an added
burden, considering that it is already experiencing dropping
revenues. The company plans to cut costs this year, including a
MXN4.26 billion earmarked for maintenance, increasing the
probability of system problems.
The quality and security of power supplies is under real threat
in the medium term, with the senate's measures coinciding with
low water levels at hydro plants, increasing fuel costs and the
delays already evident in maintaining and modernizing
thermoelectric plants, CFE said in a statement.
The paper says energy commission president and Senator Juan Jose
Rodriguez Prats of the National Action Party (PAN) strongly
opposed the measure, calling it a cheap and populist proposal.
CONTACT: COMISION FEDERAL DE ELECTRICIDAD
Rio Rodano 14, Col. Cuauhtemoc
06598 Mexico, D.F., Mexico
Phone: +52-55-5229-4400
Fax: +52-55-5310-4614
Home Page: http://www.cfe.gob.mx
Contacts:
Alfredo Elias Ayub, General Director
Arturo Hernandez Alvarez, Director of Operations
Francisco J. Santoyo Vargas, Director of Finance
TV AZTECA: To Propose First of Dividend Payouts During AGM
----------------------------------------------------------
Mexican broadcaster, TV Azteca, plans to distribute MXN36 million
to holders of its preferred shares, "D-A" and "D-L", Dow Jones
said over the weekend. The proposal will be presented for
approval during the group's AGM on April 30.
The dividend is part of a plan to distribute over US$500 million
in dividends spread over six years, to attract bondholders to
exchange their notes for the company's shares. In addition,
management will propose to reduce the company's equity and use
some of the proceeds as cash reimbursement for shareholders. The
balance will be used by controlling shareholders to pay the debt
of holding company Azteca Holdings, Dow Jones says.
Under the restructuring plan unveiled in February, TV Azteca will
cut 40% of its US$647 million debt-load by generating US$125
million in free cash annually, in addition to distributing US$500
million in dividends within the next six years.
Azteca Holdings owns 55.5% of TV Azteca and has close to US$280
million in debt. The company will use more than US$120 million
from its own cash to pay a regular dividend to shareholders,
without increasing debt, Troubled Company Reporter-Latin America
said in a previous issue.
=======
P E R U
=======
BELLSOUTH PERU: Gears Up for Stiff Competition with Telefonica
--------------------------------------------------------------
A few more weeks from now BellSouth Peru will launch its fixed
wireless access service in Lima, says Vice President Juan
Fernando Correa. The company hopes to corner 5-8% of the local
telephony market within a year of launching the service, Mr.
Correa said in an interview with Reuters. The service will
function under a prepaid model, but users will have to pay 350-
500 soles (US$100-144) for the equipment.
The launch of the new service will pit the company against
Telefonica del Peru, which has a virtual monopoly on the
residential market with 1.8 million lines in service, Reuters
says.
=================================
T R I N I D A D & T O B A G O
=================================
BWIA: Sends Home Another Twenty Pilots
--------------------------------------
Troubled carrier BWIA issued layoff notices to 20 pilots on
Wednesday night, relates the Trinidad Guardian. In its New
Business Model, launched in January, BWIA indicated that it
needed to reduce its fleet and the number of pilots it employs to
reduce operational costs.
BWIA spokesman Clint Williams clarified that the retrenchments
were part of a new staff reduction exercise, as the said pilots
were originally scheduled for retrenchment when the airline
rationalized their fleet.
"Of those 20, five were from the original 40 laid off from the
Dash 8s," said Mr. Williams.
"The other 15 were the ones originally listed for fleet
simplification because we stopped flying the MD 83s," he added.
The spokesman cited the T&T Airline Pilots Association's system
for the retraining of pilots in such an exercise - one based on
seniority, while he described as "complicated."
"A captain on a Dash 8 may have to learn how to be a co-pilot on
a 737 and vice-versa," said Mr. Williams, adding that since the
training is now complete, the pilots may be sent home.
CONTACT: British West Indies Airways
Phone: + 868 627 2942
E-mail: mailto:mail@bwee.com
Home Page: http://www.bwee.com/
Contacts:
Conrad Aleong, President and CEO (Trinidad)
Beatrix Carrington, VP Marketing and Sales (Barbados)
Paul Schutz, CFO (Trinidad)
BWIA: Government Delays Bail Out Decision, Says BWIA Hid Data
-------------------------------------------------------------
The government of Trinidad and Tobago postponed a decision
whether to bail out BWIA or not, as the airline reportedly
withheld key information concerning its debt status. The Trinidad
Guardian cited Trade and Industry Secretary Kenneth Valley saying
the airline left out critical information in the plan they
presented to the government last Tuesday.
Mr. Valley said that he was amazed that the airline is asking the
government to help finance the severance pay of the 617 workers
sent home last January.
BWIA said that it could not afford to pay the severance payments,
which total $53 million. The airline's offer of two-weeks' worth
of pay was rejected by the angry workers.
Mr. Valley also mentioned that the Airport Authority is
complaining that BWIA has not been paying its dues to the
authority.
BWIA spokesman Clint Williams said the airline did not deceive
the government with the business plans it presented. He added
that if the government wanted more information, the airline would
readily provide it.
However, he did not give any comments on Mr. Valley's statements
that the airline had not paid Airport Authority, or that it has
approached the government to help it meet its financial
obligations to the retrenched workers.
=============
U R U G U A Y
=============
ANCAP: Won't Be Affected on Uruguay Sovereign Debt Downgrade
------------------------------------------------------------
Uruguay state oil company, Ancap, received assurance that credit
ratings agencies will not downgrade the Company's ratings
following a downgrade of the country's ratings. Ancap's rating
would remain at CCC. Last week, Fitch and Standard & Poor's
downgraded Uruguay's sovereign debt rating to CC after the
government announced plans to reschedule its debt.
Ancap President Jorge Sanguinetti told Bnamericas, "They have
written to us saying they will not downgrade Ancap."
BNAmericas relates that the Company's rating, which is normally
constrained by Uruguay's sovereign, would not be downgraded as it
did not offer to exchange any debts of its own. The Company's
debt presently stands at US$105 million.
Mr. Sanguinetti added that the Company's US$50 million loan from
a syndicate of banks will not be affected. The report added that
the disbursement of the full loan, a total of US$120 million, was
discontinued after the country's ratings were downgraded in 2001.
=================
V E N E Z U E L A
=================
CANTV: Government Approves 19% Hike in Non-residential Rates
------------------------------------------------------------
Beginning April 27 non-residential subscribers to CANTV's fixed-
line service would be paying 19% more after the government
partially lifted last week a freeze on price hikes, says Business
News Americas. In addition, according to a company statement, the
authorization also allowed the firm to charge additional toll for
each corporate call made between fixed line networks. CANTV is
also seeking an increase in residential rates, but the
application is still pending, says the paper.
The price freeze was imposed in February after the local economy
collapsed following a two-month general strike. The company
booked a fourth quarter loss of VEB3.48 billion due to the
strike, a sharp contrast from the previous year's VEB28.7 billion
profit.
***********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter Latin American is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ,
and Beard Group, Inc., Washington, DC. John D. Resnick, Edem
Psamathe P. Alfeche and Oona G. Oyangoren, Editors.
Copyright 2003. All rights reserved. ISSN 1529-2746.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.
Information contained herein is obtained from sources believed to
be reliable, but is not guaranteed.
The TCR Latin America subscription rate is $575 per half-year,
delivered via e-mail. Additional e-mail subscriptions for
members of the same firm for the term of the initial subscription
or balance thereof are $25 each. For subscription information,
contact Christopher Beard at 240/629-3300.
* * * End of Transmission * * *