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Global Crossing Ltd. New Reports Operating Results (10-Q)

August 04, 2011 | About:

Global Crossing Ltd. New (GLBC) filed Quarterly Report for the period ended 2011-06-30.

Global Crossing Ltd. New has a market cap of $2.15 billion; its shares were traded at around $35.06 with and P/S ratio of 0.8.

Highlight of Business Operations:

At June 30, 2011, we had $1.529 billion of indebtedness outstanding (including long and short term debt and capital lease obligations), consisting of $738 million of 12% Senior Secured Notes ($750 million aggregate principal less $12 million of unamortized discount), $440 million of GCUK Notes ($438 million aggregate principal plus $2 million of net unamortized premium), $150 million of 9% Senior Notes, and $201 million of capital lease obligations and other debt.

During the six months ended June 30, 2011, we entered into various debt agreements to finance various equipment purchases and software licenses. The total debt obligation resulting from these agreements was $24 million. These agreements have terms that range from 6 to 48 months with a weighted average effective interest rate of 9.6%. In addition, we entered into various capital leasing arrangements that aggregated $36 million, including $4 million of proceeds from sales-leasebacks. These agreements have terms that range from 12 to 48 months with a weighted average effective interest rate of 9.1%.

On June 14, 2011, we issued a senior unsecured promissory note to STT Crossing Ltd., the holder of our convertible preferred stock and our controlling shareholder, in principal amount of $26 million for payment of dividends accrued from December 9, 2003 through March 31, 2011 on our convertible preferred stock. The note has an interest rate of 9% per annum and is payable on its maturity date of December 14, 2011 or prior to the maturity date: (i) if all conditions to the consummation of the Amalgamation of the Company with Level 3 Communications, Inc. have been satisfied or waived; (ii) 45 days after any termination of the Amalgamation agreement relating to the Amalgamation of the Company with Level 3 prior to its consummation; or (iii) if a change of control with respect to the Company or an event of default under the note occurs. Regular quarterly dividends on our convertible preferred stock in the amount of approximately $1 in respect of periods after March 31, 2011 are expected to be paid in cash on the fifteenth day of each July, October, January and April, subject to the satisfaction of certain solvency tests required by Bermuda law.

Cash flows used in operating activities increased in the six months ended June 30, 2011 compared with the same period in 2010 primarily as a result of changes in working capital including higher interest payments in the current period. During the six months ended June 30, 2011, we made $87 million of interest payments compared with $76 million in the same period of 2010. During the six months ended June 30, 2011 we received $51 million of cash receipts from the sale of IRUs and prepaid services compared with $46 million in the same period of 2010.

At June 30, 2011, we had $9 million of obligations registered and subject to approval by CADIVI for the conversion of bolivares into foreign currencies. We cannot predict the timing and extent of any CADIVI approvals to honor foreign debt, distribute dividends or otherwise expatriate capital using the official Venezuelan exchange rate. Some approvals have been issued within a few months while others have taken more than one year. During the six months ended June 30, 2011, we received $6 million of approvals from CADIVI to convert bolivares to U.S. Dollars at both the essential and non-essential official rates. To date, we have not executed any exchanges through SITME. If we were to successfully avail our self of the SITME process to convert a portion of our Venezuelan subsidiarys cash balances into U.S. Dollars, we would incur currency exchange losses in the period of conversion based on the difference between the official exchange rate and the SITME rate. Additionally, if we were to determine in the future that the SITME rate was the more appropriate rate to use to measure bolivar-based assets, liabilities and transactions, reported results would be further adversely affected.

As of June 30, 2011, our Venezuelan subsidiary had $49 million of cash and cash equivalents, of which $4 million was held in U.S. Dollars and $45 million (valued at the fixed official CADIVI rate of 4.30 Venezuelan bolivares to the U.S. Dollar at June 30, 2011 (the CADIVI rate)) was held in Venezuelan bolivares. For the three and six months ended June 30, 2011, our Venezuelan subsidiary contributed approximately $14 million and $28 million, respectively, of our consolidated revenue and $8 million and $16 million, respectively, of our consolidated OIBDA, in each case based on the CADIVI rate. These amounts do not include any allocated corporate overhead costs or transfer pricing adjustments. As of June 30, 2011, our Venezuelan subsidiary had $49 million of net monetary assets of which $6 million were denominated in U.S. Dollars and $43 million were denominated in Venezuelan bolivares at the CADIVI rate. As of June 30, 2011, our Venezuelan subsidiary had $87 million of net assets. In light of the Venezuelan exchange control regime, none of these net assets (other than the $4 million of cash denominated in U.S. Dollars and held outside of Venezuela) may be transferred to GCL in the form of loans, advances or cash dividends without the consent of a third party (i.e., CADIVI or SITME).

Read the The complete Report

About the author:

10qk
Charlie Tian, Ph.D., is the founder of GuruFocus. You can now order his book Invest Like a Guru on Amazon.

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