Update: Global Crossing seeks Chapter 11

Troubled wholesale telecommunications company, Global Crossing filed for Chapter 11 bankruptcy protection today after signing a funding deal which hinges on restructuring.

Hutchison Whampoa and Singapore Technologies have agreed to invest $750m in return for a joint majority stake in the company.

The deal will go through on the condition that a reorganisation of the company is agreed before the end of August.

However, Bernt Ostergaard, telecoms analyst at Giga, said the organisation has already transferred half of its cash to its stand-alone sister, Asia Global Crossing (AGC) to save it from creditors.

Ostergaard said: "There were indications the management of Global Crossing were moving money into AGC in the first week of January this year, a typical move of companies preparing to go bankrupt.

"Of the $400m they could draw on, Global Crossing took $200m and put it into AGC. The cash is out of Global Crossing's hands and out of the reach of its creditors."

Phil Metcalfe, senior VP for customer service delivery at Global Crossing said: "The investment eliminates the bulk of our debt but will dilute the share price. However, the shares are so low holders wouldn't have got much from them anyway."

Global Crossing got a waiver from its lenders on 28 December for violations of a credit agreement concerning $2.25bn in loans, valid until 13 February 2002.

Prior to that, Standard and Poor's downgraded the company on 11 December after raising concerns about its liquidity and said it was unlikely to be able to drum up more funding.

The company posted a third quarter loss of $3.4bn in November 2001.