Hutchison Whampoa's offer for Global Crossing could turn out to be a stalking-horse, according to analysts, after a group of shareholders from the bankrupt company proposed a US$5.5 billion recapitalisation programme.
The analysts said the new proposal did not seem realistic, given the difficulty of raising capital from shareholders, but there were likely to be other proposals that would challenge the joint offer by Hutchison and Singapore Technologies Telemedia (STT).
A group of Global Crossing shareholders claiming to represent thousands of shareholders have proposed issuing two classes of convertible warrants to raise US$5.5 billion for the undersea cable operator. The warrants could be converted to a shareholding of no more than 62.3 per cent, giving existing shareholders a continuing role in the company.
However, the new proposal does not offer any direct funding for Global Crossing. Neither does it propose a haircut for creditors and bondholders.
Last month, Hutchison and STT proposed buying 79 per cent of Global Crossing for US$750 million. They asked that the company's US$7 billion debt be forgiven in return for US$300 million in cash, US$800 million in debt and a 21 per cent stake. Existing shareholders would have nothing and bankers would take at least an 84 per cent haircut.
A Hong Kong-based analyst of a US brokerage that is among the major creditors of Global Crossing said: 'Which is a lesser of two evils I don't know. Given that the very harsh conditions by Hutchison and [STT] would upset most people, I think their offer is a stalking-horse.'
It would not be easy for the two Asian investors to take the prize assets, he said.