29 January 2002 Former high-flying telecoms operator Global Crossing has filed for Chapter 11 bankruptcy protection. It is the largest ever telecoms bankruptcy and the fourth largest bankruptcy in the US.

At the same time, Global Crossing announced that it had signed a letter of intent with Hong Kong-based Hutchison Whampoa – founder of the Orange mobile phone network – and Singapore Technologies Telemedia, for them to invest $750 million (€870m) in the beleaguered company in return for a majority stake.

At the height of dot-com mania, Bermuda-based Global Crossing was valued at almost $50 billion (€58bn). The $750 million (€870m) investment is dependent on Global Crossing persuading banks, bondholders and other creditors to write off much of the company’s $12.4 billion (€14.1bn) debt.

The company has a reported $22.4 billion (€26bn) in assets. For the three months to the end of September 2001, Global Crossing posted a loss of $3.4 billion (€3.95bn).

Global Crossing was once considered the main challenger to the telecoms establishment, which had been slow to capitalise on growing demands for Internet bandwidth. Global Crossing debt-financed on a lavish scale to build out its international fibre optic cable networks.

However, over-investment in these networks, coupled with slower than expected growth in Internet traffic has reduced sales of bandwidth, leaving Global Crossing unable to service its debt. During the last year Global Crossing’s stock has fallen by more than 96% and stood at just 30 cents when it was suspended on Monday, 28 January.

Global Crossing admits that shareholders and the holders of $3.2 billion (€3.71bn) in preference shares are unlikely to get a penny.

However, the company has not yet begun talks with its creditors about its plans for restructuring. According to Global Crossing CEO John Legere, Global Crossing is facing “a balance sheet issue, not an operational one.”

Asia Global Crossing, a separately listed subsidiary, has not been included in the bankruptcy proceedings.