Bondholder calls on Asia Global Crossing to draw on $400 mln loan facility

By Peter Heap

New York, Nov. 13 - An investors holding some of Asia Global Crossing Ltd.'s notes is calling on the company to draw down its $400 million loan facility with Global Crossing Ltd. now, while the money is still available.

"We are of the opinion that the rapidly deteriorating financial position of GC makes it imperative for AGC to immediately draw down in full on the Facility so as to negate any risk that these funds, which it requires for the fulfilment of its business plan, will not be available at a future time," said Norbert Lou, a portfolio manager at Elliott Associates, LP, in a news release. "Furthermore, we believe that the injection of cash into AGC will assist in restoring confidence in the company and give AGC the flexibility to improve its capital structure."

Elliott Associates, LP and Elliott International, LP own some of Asia Global Crossing's $408 million of 13 3/8% senior notes due 2010. Lou declined to disclose how much of the bonds his company owns.

Asia Global Crossing has a $400 million subordinated loan note facility with Global Crossing.

Asked what response he has received so far from the company, Lou told Prospect News: "They basically say that they think the funds will be there when they need it and they don't need to draw it at this time.

"I think their assessment of the funds being there when they need it is questionable. I think the fact that the two major rating agencies have downgraded the ratings for Global Crossing would make an independent observer wonder whether the funds would be there when Asia Global Crossing needs it, whether Global Crossing would have the cash when the draw-down was made." Moody's Investors Service downgraded Global Crossing's notes to B2 from Ba2 on Oct. 4 and Standard & Poor's cut them to B- from BB- on Nov. 6.

Lou added that the Asia Global Crossing's CEO said he has a unique insight into Global Crossing and believes there is no need to worry.

"I think the public markets and most of the independent observers would disagree with the CEO," Lou said.

Lou's concern is that because of the overlapping boards, many of the people making the decision whether to draw on the facility - the directors of Asia Global Crossing - are the same people that have to protect Global Crossing's situation.

He wants the situation evaluated by an independent financial adviser and for the independent directors - those not connected to Global Crossing - to decide without influence from the other directors whether the facility should be drawn down.

"It seems to us, if Asia Global Crossing had its own board and was an independent company there's very few reasons the directors could come up with that would justify not drawing $400 million when the lender that's supplying the $400 million commitment is in danger of not being around and not honoring the commitment if you wait a lot longer, especially since the $400 million is critical to the business plan being fully funded," Lou said.

He noted Global Crossing recently drew down its own $2.4 billion credit facility in full even though it said it did not need the funds.

Lou said he has been in touch with other bondholders but at this point is the only one that has retained law firm Cadwalader, Wickersham & Taft and made a public statement.

He declined to speculate on what he would do if the company ignores his request.

"Our plan is not to sell the bonds if we don't get a response," Lou added, but commented: "I don't think we will just give up necessarily."

Asia Global Crossing did not reply to a request for a response.

End

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