<PAGE>
FILED PURSUANT TO RULE 424B(3)
FILE NO. 333-94449
PROSPECTUS
$2,000,000,000
[LOGO] Global Crossing Ltd.
Offer to exchange all outstanding
$900,000,000 9 1/8% Senior Notes due 2006
for
$900,000,000 9 1/8% Senior Notes due 2006
which have been registered under the Securities Act of 1933
and
Offer to exchange all outstanding
$1,100,000,000 9 1/2% Senior Notes due 2009
for
$1,100,000,000 9 1/2% Senior Notes due 2009
which have been registered under the Securities Act of 1933
The exchange offer
We are offering to exchange both series of our outstanding notes for new
notes with substantially identical terms that have been registered under the
Securities Act and are freely tradeable. In this document, we refer to those
new notes as the "exchange notes".
The exchange offer expires at 5:00 p.m., New York City time, on May 17,
2000, unless extended. We do not currently intend to extend the expiration
date.
In the exchange offer:
. we will exchange all outstanding notes that you validly tender and do
not validly withdraw before the exchange offer expires for an equal
principal amount of exchange notes; and
. you may withdraw tenders of outstanding notes at any time before the
exchange offer expires.
Resales of the exchange notes
You may sell the exchange notes in the over-the-counter market, in
negotiated transactions or through a combination of those methods.
----------------------------------------------------
Investing in the exchange notes involves risks, which we describe in the
"Risk Factors" section beginning on page 26 of this prospectus.
----------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
----------------------------------------------------
The date of this prospectus is April 19, 2000.
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You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
different information. We are not making an offer to sell these securities in
any state where the offer is not permitted. You should not assume that the
information contained in this prospectus is accurate as of any date other than
the date on the front cover of this prospectus.
TABLE OF CONTENTS
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Page
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Where You Can Find More
Information........................ i
Incorporation by Reference.......... ii
Summary............................. 1
Risk Factors........................ 26
Cautionary Statement Regarding
Forward-Looking Statements......... 35
Use of Proceeds..................... 35
Ratio of Earnings to Fixed Charges
and Preferred Dividends............ 36
</TABLE>
<TABLE>
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Page
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The Exchange Offer.................................................... 37
Description of the Exchange Notes..................................... 47
Book-Entry Procedures and Settlement.................................. 84
Certain Income Tax Consequences....................................... 86
Plan of Distribution.................................................. 90
Legal Matters......................................................... 90
Experts............................................................... 90
Service of Process and Enforcement of Liabilities..................... 91
</TABLE>
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WHERE YOU CAN FIND MORE INFORMATION
The SEC allows us to incorporate by reference the information we file with
them, which means that we can disclose important information to you by
referring you to those documents, without including that information or
delivering it with this prospectus. We provide a list of all documents we
incorporate by reference in this prospectus under "Incorporation by Reference"
on page ii.
You may read and copy the information that we incorporate in this prospectus
by reference as well as other reports, proxy statements and other information
that we and our parent company, Global Crossing Ltd., file with the SEC at the
public reference facilities maintained by the SEC at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the SEC's regional offices located
at 7 World Trade Center, 13th floor, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. You may also obtain copies
of those materials at prescribed rates from the public reference section of the
SEC at 450 Fifth Street, Washington, D.C. 20549. You may obtain copies from the
public reference room by calling the SEC at (800) 732-0330. In addition, we are
required to file electronic versions of those materials with the SEC through
the SEC's EDGAR system. The SEC maintains a web site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. You may also
review reports and other information concerning Global Crossing Ltd. at the
offices of the National Association of Securities Dealers, Inc. at 1735 K
Street, N.W., Washington, D.C. 20001-1500.
You may also request a copy of those materials, free of cost, by writing or
telephoning us at the following address:
Investor Relations
Global Crossing Holdings Ltd.
360 N. Crescent Drive
Beverly Hills, CA 90210
310-385-5200
To obtain timely delivery of those materials, you must request the
information no later than five business days before the expiration date of the
exchange offer.
i
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INCORPORATION BY REFERENCE
We incorporate by reference in this prospectus the information contained in
the following documents:
. our annual report on Form 10-K for the fiscal year ended December 31,
1999;
. the annual report on Form 10-K for the fiscal year ended December 31,
1999 of our parent company, Global Crossing Ltd.;
. our current reports on Form 8-K filed on January 11, 2000, as amended by
Form 8-K/A filed on January 19, 2000; and March 2, 2000;
. the current reports on Form 8-K of Global Crossing Ltd. filed on January
11, 2000, as amended by Form 8-K/A filed on January 19, 2000; February
18, 2000; March 2, 2000; and March 3, 2000;
. the financial statements of Frontier Corporation and the Global Marine
Systems business of Cable & Wireless Plc incorporated by reference or
included in the registration statement on Form S-4 (File No. 333-86693),
filed with the SEC on September 8, 1999, of Global Crossing Ltd.; and
. all documents that we and Global Crossing Ltd. file with the SEC under
Sections 13(a), 13(c), 14 or 15 of the Securities Exchange Act of 1934
until we complete the exchange offer.
You may obtain copies of those documents from us, free of cost, by
contacting us at the address or telephone number provided in "Where You Can
Find More Information" on page i.
Information that we and Global Crossing Ltd. file later with the SEC and
that is incorporated by reference in this prospectus will automatically update
and supersede information contained in this prospectus. You will be deemed to
have notice of all information incorporated by reference in this prospectus as
if that information were included in this prospectus.
----------------
The Bermuda Monetary Authority has given its consent to the issue and the
transfer of the exchange notes. Approvals or permissions received from the
Bermuda Monetary Authority do not constitute a guaranty by the Bermuda Monetary
Authority as to our performance or our credit worthiness. Accordingly, in
giving those approvals or permissions, the Bermuda Monetary Authority will not
be liable for our performance or default or for the correctness of any opinions
or statements expressed in this document.
The Bermuda Monetary Authority has classified us as non-resident in Bermuda
for exchange control purposes. Accordingly, we may convert currency, other than
Bermuda currency, held for our account to any other currency without
restriction. Persons, firms or companies regarded as residents of Bermuda for
exchange control purposes require specific consent under the Exchange Control
Act, 1972 of Bermuda, and regulations promulgated under that Act, to purchase
any shares in our capital stock or any debt securities that we may issue. Under
the terms of the consent given to us by the Bermuda Monetary Authority, the
issuance and transfer of the exchange notes between persons, firms or companies
regarded as non-resident in Bermuda for exchange control purposes may be
effected without further permission from the Bermuda Monetary Authority.
----------------
ii
<PAGE>
NOTICE TO NEW HAMPSHIRE RESIDENTS
Neither the fact that a registration statement or an application for a
license has been filed under Chapter 421-B of the New Hampshire Uniform
Securities Act with the State of New Hampshire nor the fact that a security is
effectively registered or a person is licensed in the State of New Hampshire
constitutes a finding by the Secretary of State that any document filed under
RSA 421-B is true, complete and not misleading. Neither any such fact nor the
fact that an exemption or exception is available for a security or a
transaction means that the Secretary of State has passed in any way upon the
merits or qualifications of, or recommended or given approval to, any person,
security or transaction. It is unlawful to make, or cause to be made, to any
prospective purchaser, customer or client any representation inconsistent with
the provisions of this paragraph.
iii
<PAGE>
SUMMARY
This section contains a general summary of the information contained in this
prospectus. It may not include all the information that is important to you. To
understand this exchange offer, you should read the entire prospectus and the
documents incorporated by reference before making an investment decision.
Global Crossing Ltd.
Global Crossing Ltd., our parent company, is building and offering services
over the world's first integrated global fiber optic network, consisting of
101,000 announced route miles and serving five continents, 27 countries and
more than 200 major cities. Upon completion of its currently announced systems,
the Global Crossing network and its telecommunications and Internet product
offerings will be available in markets constituting over 80% of the world's
international communications traffic.
Global Crossing Ltd. is included in both the S&P 500 index and the Nasdaq
100 index. Its operations are headquartered in Hamilton, Bermuda, with
executive offices in Los Angeles, California; Morristown, New Jersey; and
Rochester, New York.
Global Crossing Holdings Ltd.
We are a wholly-owned subsidiary of Global Crossing Ltd. We are incorporated
in Bermuda, and the address of our principal executive offices is Wessex House,
45 Reid Street, Hamilton HM12, Bermuda. Our telephone number is 441-296-8600.
You may visit us at our web site located at www.globalcrossing.com.
The Exchange Offer
On November 19, 1999, we completed the private offering of the outstanding
notes. In connection with that offering, we and Global Crossing Ltd. entered
into a registration rights agreement with the initial purchasers in the private
offering. In that agreement, we and Global Crossing Ltd. agreed to deliver to
you this prospectus, and we agreed to complete the exchange offer in 180 days
after the date of the original issuance of the outstanding notes. You are
entitled to exchange in the exchange offer your outstanding notes for exchange
notes which have substantially identical terms with the outstanding notes,
except that:
. the exchange notes have been registered under the Securities Act and are
freely tradeable; and
. the special interest which would be payable on the outstanding notes in
specified circumstances relating to our failure to complete the exchange
offer within 180 days after the original issuance of the outstanding
notes is no longer applicable.
The following section summarizes the terms of the exchange offer:
The exchange offer...... We are offering to exchange both series of the
outstanding notes. We are offering to exchange up to:
. $900,000,000 aggregate principal amount of
exchange notes due 2006 for up to the same
amount of outstanding notes due 2006; and
. $1,100,000,000 aggregate principal amount of
exchange notes due 2009 for up to the same
amount of outstanding notes due 2009.
1
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You may exchange outstanding notes only in amounts
which are multiples of $1,000.
Resales................. Based on an interpretation by the staff of the SEC
outlined in a series of no-action letters issued to
third parties, including Exxon Capital Holdings
Corporation and Morgan Stanley & Co. Incorporated, we
believe that you may offer the exchange notes for
resale and resell or otherwise transfer the exchange
notes without compliance with the registration and
prospectus delivery provisions of the Securities Act,
as long as you:
. are acquiring the exchange notes in the
ordinary course of your business; and
. have not engaged in, do not intend to engage
in and have no arrangement or understanding
with any person to participate in a
distribution of the exchange notes.
However, you may not rely on the previous paragraph
and must comply with the registration and prospectus
delivery provisions of the Securities Act if you:
. are an affiliate of ours within the meaning of
Rule 405 under the Securities Act;
. do not acquire exchange notes in the ordinary
course of your business; or
. tender in the exchange offer with the
intention to participate or for the purpose of
participating in a distribution of exchange
notes.
Expiration.............. The exchange offer will expire at 5:00 p.m., New York
City time, on May 17, 2000, or on a later date and
time if we decide to extend the exchange offer. We
refer to the date on which the exchange offer will
expire as the "expiration date".
Withdrawal of tenders... You may withdraw any outstanding notes that you
tender in the exchange offer at any time before the
expiration date. We will return without expense to
you any outstanding notes not accepted for exchange
for any reason promptly after the expiration or
termination of the exchange offer.
Certain conditions to
the exchange offer.....
The exchange offer is subject to customary
conditions, which we may waive. Please read the
section "The Exchange Offer--Certain Conditions to
the Exchange Offer" on page 39.
Procedures for
tendering outstanding
notes.................. If you wish to accept the exchange offer, you must:
. complete, sign and date the accompanying
letter of transmittal or a facsimile of that
letter according to the instructions contained
in this prospectus and that letter;
. mail or otherwise deliver the letter of
transmittal or a facsimile of that letter,
together with the outstanding notes and any
other required documents, to the exchange
agent at the address indicated on the cover
page of the letter of transmittal; or
2
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. if you hold outstanding notes through the DTC
and wish to participate in the exchange offer,
you must comply with the Automated Tender
Offer Program procedures of the DTC, by which
you will agree to be bound by the letter of
transmittal.
By signing or agreeing to be bound by the letter of
transmittal, you will represent to us that, among
other things:
. any exchange notes that you receive will be
acquired in the ordinary course of your
business;
. you have no arrangement or understanding with
any person or entity to participate in a
distribution of the exchange notes;
. if you are a broker-dealer that will receive
exchange notes for your own account in
exchange for outstanding notes that you
acquired as a result of market-making or other
trading activities, you will deliver a
prospectus, as required by law, in connection
with any resale of those exchange notes; and
. you are not an affiliate of ours within the
meaning of Rule 405 under the Securities Act
or, if you are an affiliate, you will comply
with any applicable registration and
prospectus delivery requirements of the
Securities Act.
Special procedures for
beneficial owners......
If you are a beneficial owner of outstanding notes
which are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
you wish to tender your outstanding notes in the
exchange offer, you should contact the registered
holder promptly and instruct the registered holder to
tender on your behalf. If you wish to tender on your
own behalf, before completing and executing the
letter of transmittal, you must either make
appropriate arrangements to register ownership of the
outstanding notes in your name or obtain a properly
completed bond power from the registered owner.
However, the transfer of registered ownership may
take considerable time, and you may not be able to
complete it before the expiration date.
Guaranteed delivery If you wish to tender your outstanding notes and (1)
procedures............. your outstanding notes are not immediately available
or (2) you cannot deliver your outstanding notes, the
letter of transmittal or any other document required
by the letter of transmittal or (3) you are unable to
comply with the applicable procedures under the DTC's
Automated Tender Offer Program before the expiration
date, you must tender your outstanding notes under
the guaranteed delivery procedures outlined in this
prospectus under "The Exchange Offer--Guaranteed
Delivery Procedures" on page 43.
Effect on some terms of
the outstanding
notes.................. Once we complete the exchange of all validly tendered
outstanding notes in the exchange offer, we will have
satisfied our obligation under the registration
rights agreement to effect the exchange offer, and we
will not be liable to pay special interest on the
outstanding notes as described in
3
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that agreement. If you fail to tender your
outstanding notes in the exchange offer, you will
continue to hold outstanding notes and you will be
entitled to all the rights and limitations applicable
to the outstanding notes in the indenture, except for
the rights under the registration rights agreement
that by their terms terminate when the exchange offer
is completed.
Some adverse
consequences of
failure to exchange....
We expect that a substantial portion of the
outstanding notes will be tendered and accepted in
the exchange offer. In that case, the trading market
for the outstanding notes will be adversely affected.
If you fail to tender your outstanding notes in the
exchange offer, your notes will continue to be
subject to the transfer restrictions outlined in the
outstanding notes and in the indenture. In general,
the outstanding notes may not be offered or sold,
unless registered under the Securities Act or in a
transaction not subject to the registration
requirements of the Securities Act and applicable
state securities laws.
We do not intend to register any outstanding notes
under the Securities Act other than in the exchange
offer.
Certain income tax
considerations.........
The exchange of outstanding notes for exchange notes
in the exchange offer will not be a taxable event for
(1) United States federal income tax purposes or (2)
Bermuda income tax purposes.
Use of proceeds......... We will not receive any cash proceeds from the
issuance of the exchange notes in the exchange offer.
Exchange agent.......... The exchange agent for the exchange offer will be
United States Trust Company of New York. You may find
the exchange agent's address and telephone number in
"The Exchange Offer--Exchange Agent" on page 44.
The Exchange Notes
Issuer.................. Global Crossing Holdings Ltd., a Bermuda company
Securities offered...... $2,000,000,000 aggregate principal amount of exchange
notes, which we will issue in two series:
. $900,000,000 9 1/8% senior notes due 2006; and
. $1,100,000,000 9 1/2% senior notes due 2009
Guarantor............... Global Crossing Ltd., our parent company
Maturity................ The 2006 exchange notes will mature on November 15,
2006. The 2009 exchange notes will mature on November
15, 2009.
4
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Interest................ The 2006 exchange notes will bear interest at the
rate of 9 1/8% per year. The 2009 exchange notes will
bear interest at the rate of 9 1/2% per year. We will
pay interest on the exchange notes on May 15 and
November 15 of each year, beginning on May 15, 2000.
Ranking................. The exchange notes are unsecured and rank equally
with all our other senior unsecured debt. We are a
holding company, and therefore the exchange notes
will be effectively subordinated to all indebtedness
and other liabilities of our subsidiaries.
Redemption.............. We may redeem the 2006 exchange notes before maturity
only in the case of a change of control redemption or
a tax redemption described below. We may redeem the
2009 exchange notes in each of the following
circumstances:
1. Optional redemption:
We may redeem some or all of the 2009 exchange
notes at any time on or after November 15, 2004.
The redemption price equals 104.750% of the
principal amount of the exchange notes if we
redeem them in 2004, plus accrued and unpaid
interest to the redemption date. Thereafter, this
percentage gradually declines to 100% on and after
November 15, 2007.
2. Equity offering redemption:
On or before November 15, 2002, we may redeem up
to 25% of the original principal amount of the
2009 exchange notes using the net proceeds of some
equity offerings described under "Description of
the Exchange Notes--Equity Offering Redemption" on
page 49. The redemption price equals 109.50% of
the principal amount of the 2009 exchange notes
that we will redeem, plus accrued and unpaid
interest to the redemption date.
3. Change of control redemption:
We may redeem all but not part of the exchange
notes of each series if we become subject to a
change of control at a redemption price of 100% of
the principal amount plus an applicable premium,
described in "Description of the Exchange Notes--
Change of Control Redemption" on page 49, and any
accrued and unpaid interest to the redemption
date. We may redeem the 2006 exchange notes on
these terms at any time. We may redeem the 2009
exchange notes on these terms at any time before
November 15, 2004.
4. Tax redemption:
We may redeem all but not part of the exchange
notes of each series at a redemption price equal
to 100% of the principal amount of the exchange
notes, plus any accrued and unpaid interest to the
redemption date, if there is a change in tax law
requiring us to pay additional amounts. See
"Description of the Exchange Notes--Optional Tax
Redemption" on page 50.
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Change of control put If we become subject to a change of control, and we
right................... do not redeem the exchange notes as discussed above,
each holder of exchange notes will have the right to
require us to purchase all or part of his or her
exchange notes at 101% of the principal amount, plus
any accrued and unpaid interest to the date of
repurchase.
Covenants............... The terms of the exchange notes limit our ability and
the ability of some of our subsidiaries, Global
Crossing Ltd. and Frontier, but not its subsidiaries,
to, among other things:
. sell assets;
. make restricted payments;
. incur additional indebtedness;
. create liens;
. place restrictions on distributions and other
payments;
. issue or sell equity interests of restricted
subsidiaries;
. merge or consolidate with or transfer
substantial assets to another entity;
. engage in transactions with related persons;
and
. engage in any business other than permitted
businesses.
These limitations are subject to important exceptions
and qualifications discussed in "Description of the
Exchange Notes--Repurchase at the Option of Holders"
on page 53 and "--Covenants" on page 55.
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Selected historical financial information
Global Crossing Ltd. acquired Global Marine Systems on July 2, 1999 and
Frontier on September 28, 1999.
On November 24, 1999, we formed, together with Softbank Corp. and Microsoft
Corporation, a new joint venture company called Asia Global Crossing. We have
contributed to Asia Global Crossing our 57.75% ownership interest in Pacific
Crossing and our development rights in East Asia Crossing. Among other things,
each of Softbank and Microsoft contributed $175 million in cash to Asia Global
Crossing. Also on November 24, 1999, Global Crossing Ltd. acquired Racal
Telecom, a group of wholly-owned subsidiaries of Racal Electronics plc. On
January 12, 2000, we formed a joint venture with Hutchison Whampoa Limited,
called Hutchison Global Crossing, and issued $400 million aggregate liquidation
preference of our 6 3/8% cumulative convertible preferred stock, series B, to
Hutchison Whampoa.
On February 22, 2000, Global Crossing Ltd. announced a definitive agreement
to acquire IXnet, Inc., a leading provider of specialized IP-based network
services to the global financial services community, and its parent company,
IPC Communications, Inc., in exchange for shares of its common stock valued at
approximately $3.8 billion. Under the terms of the definitive merger agreement,
1.184 shares of Global Crossing Ltd.'s common stock will be exchanged for each
share of IXnet common stock not owned by IPC and 5.417 shares of Global
Crossing Ltd.'s common stock will be exchanged for each share of IPC common
stock. Global Crossing Ltd. expects the acquisition to be completed in the
second quarter of 2000. The acquisition is subject to regulatory approval and
customary closing conditions.
In the following tables, we provide selected historical financial
information for (1) Global Crossing Ltd., (2) Global Crossing Holdings,
(3) Global Marine Systems, (4) Frontier, (5) Racal Telecom and (6) HCL Holdings
Limited, a group of wholly-owned subsidiaries of Hutchison Whampoa which has
been contributed into the Hutchison Global Crossing joint venture. We do not
provide any separate historical financial information relating to the Asia
Global Crossing joint venture, as all relevant historical financial information
is reflected in the historical financial information of Global Crossing Ltd.
The selected historical financial information presented in the following
tables has been derived from the audited and unaudited financial statements of
Global Crossing Ltd., Global Crossing Holdings, Global Marine Systems,
Frontier, Racal Telecom and HCL Holdings for the periods presented. This
information is only a summary, and you should read it together with the more
detailed historical financial information included or incorporated by reference
in this document. For instructions on how to obtain information incorporated by
reference, see "Where You Can Find More Information" on page ii.
Global Crossing Ltd. selected historical financial information
The table below shows the selected historical financial information for
Global Crossing Ltd. This information has been prepared using the consolidated
financial statements of Global Crossing Ltd. as of the dates indicated and for
each of the fiscal years in the period from inception, March 19, 1997, to
December 31, 1999. The consolidated income statement data below for each of the
fiscal years in the period from inception, March 19, 1997, to December 31, 1999
and the consolidated balance sheet data as of December 31, 1999 and 1998 have
been derived from financial statements audited by Arthur Andersen, independent
public accountants, which are incorporated by reference in this document.
Global Crossing Ltd. derived the remaining data from unaudited condensed
consolidated financial statements.
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In reading the following selected historical financial information, please
note the following:
. The statement of operations data for the year ended December 31, 1999
includes the results of Global Marine Systems for the period from July
2, 1999, date of acquisition, through December 31, 1999; the results of
Frontier for the period from September 30, 1999, date of acquisition,
through December 31, 1999; and the results of Racal Telecom for the
period from November 24, 1999; date of acquisition, through December 31,
1999. The consolidated balance sheet as of December 31, 1999 includes
amounts related to Global Marine Systems, Frontier and Racal Telecom.
. During the year ended December 31, 1999, Global Crossing Ltd. recorded a
$15 million expense, net of tax benefit, due to the adoption of
Statement of Position 98-5, "Reporting on the Cost of Start-Up
Activities". See the "Cumulative effect of change in accounting
principles" item in the statement of operations data.
. During the years ended December 31, 1999 and 1998, Global Crossing Ltd.
recognized $51 million and $39 million, respectively, of stock-related
expense relating to stock options and rights to purchase stock issued
during that period which entitle the holders to purchase common stock.
See the "Stock-related expense" item in the statement of operations
data.
. On December 15, 1999, Global Crossing Ltd. issued 2,600,000 shares of 7%
cumulative convertible preferred stock at a liquidation preference of
$250.00 for net proceeds of $630 million. Each share of preferred stock
is convertible into 4.6948 shares of common stock based on a conversion
price of $53.25. Dividends on the preferred stock are cumulative from
the date of issue and will be payable on February 1, May 1, August 1 and
November 1 of each year, beginning on February 1, 2000, at the annual
rate of 7%.
. On November 24, 1999, Global Crossing Ltd. completed its acquisition of
Racal Telecom, a group of wholly owned subsidiaries of Racal Electronics
plc, for approximately $1.6 billion in cash. Racal Telecom owns one of
the most extensive fiber telecommunications networks in the United
Kingdom, consisting of approximately 4,650 route miles of fiber and
reaching more than 2,000 cities and towns.
. On November 12, 1999, we issued two series of senior unsecured notes,
which we refer to in this document as the "new senior notes". The 9 1/8%
senior notes are due November 15, 2006 with a face value of $900
million, and the 9 1/2% senior notes are due November 15, 2009 with a
face value of $1,100 million. The new senior notes are guaranteed by
Global Crossing Ltd. Interest will be paid on the notes on May 15 and
November 15 of each year, beginning on May 15, 2000.
. On November 5, 1999, Global Crossing Ltd. issued 10,000,000 shares of 6
3/8% cumulative convertible preferred stock at a liquidation preference
of $100.00 for net proceeds of approximately $969 million. Each share of
preferred stock is convertible into 2.2222 shares of common stock, based
on a conversion price of $45.00. Dividends on the preferred stock are
cumulative from the date of issue and will be payable on February 1, May
1, August 1 and November 1 of each year, beginning on February 1, 2000,
at the annual rate of 6 3/8%.
. On September 28, 1999, Global Crossing Ltd. completed the acquisition of
Frontier in a merger transaction valued at over $10 billion, with
Frontier shareholders receiving 2.05 shares of Global Crossing Ltd.'s
common stock for each share of Frontier common stock held. Frontier is
one of the largest long distance telecommunications companies in the
United States and one of the leading providers of facilities-based
integrated communications and Internet services.
. On July 2, 1999, Global Crossing Ltd. completed its acquisition of the
Global Marine Systems division of Cable & Wireless Plc for approximately
$908 million in cash and assumed liabilities. Global Marine Systems owns
the largest fleet of cable laying and maintenance vessels in the world
and currently services more than a third of the world's undersea cable
miles.
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. On May 16, 1999, Global Crossing Ltd. entered into a definitive
agreement to merge with U S WEST, Inc. On July 18, 1999, Global Crossing
Ltd. and U S WEST agreed to terminate their merger agreement, and U S
WEST agreed to merge with Qwest Communications International Inc. As a
result, U S WEST paid us a termination fee of $140 million in cash and
returned 2,231,076 shares of Global Crossing Ltd.'s common stock
purchased in a related tender offer, and Qwest committed to purchase
capacity on the Global Crossing network at established market unit
prices for delivery over the next four years and committed to make
purchase price payments to Global Crossing Ltd. for this capacity of
$140 million over the next two years. During the year ended December 31,
1999, Global Crossing Ltd. recognized $210 million, net of merger
related expenses, of other income in connection with the termination of
the U S WEST merger agreement.
. The "Termination of advisory services agreement" item in the statements
of operations data includes a charge for the termination of the advisory
services agreement as of June 30, 1998. Global Crossing Ltd. acquired
the rights from those entitled to fees payable under the advisory
services agreement in consideration for the issuance of common stock
having an aggregate value of $135 million and the cancellation of
approximately $3 million owed to Global Crossing Ltd. under a related
advance agreement. As a result of this transaction, Global Crossing Ltd.
recorded a non-recurring charge in the approximate amount of $138
million during the year ended December 31, 1998. In addition, Global
Crossing Ltd. recognized as an expense approximately $2 million of
advisory fees incurred before the termination of the contract.
. Global Crossing Ltd. granted warrants to Pacific Capital Group, Inc., a
shareholder, and some of its affiliates for the Pacific Crossing, Mid-
Atlantic Crossing and Pan American Crossing systems and related rights.
The $275 million value of the common stock was originally allocated to
"Construction in progress" in the amount of $112 million and as
"Investment in and advances to/from affiliates" in the amount of $163
million. See the "property and equipment" item in the balance sheet
data. The "Investment in and advance to/from affiliates" item in the
balance sheet data includes $163 million as of December 31, 1999 and
1998, respectively, representing the value of the warrants described in
the bullet point immediately above applicable to the Pacific Crossing
system.
. Adjusted EBITDA is defined as operating income (loss), plus goodwill
amortization, depreciation and amortization, non-cash cost of capacity
sold, stock related expenses, incremental cash deferred revenue and
amounts relating to the termination of the advisory services agreement.
This definition is consistent with financial covenants contained in
Global Crossing Ltd.'s major financial agreements. This information
should not be considered as an alternative to any measure of performance
as promulgated under generally accepted accounting principles, which we
refer to as "GAAP". Global Crossing Ltd.'s calculation of adjusted
EBITDA may be different from the calculation used by other companies
and, therefore, comparability may be limited.
9
<PAGE>
Global Crossing Ltd. and Subsidiaries
(in thousands, except share and per share information)
<TABLE>
<CAPTION>
Period from
March 19, 1997
Year Ended Year Ended (Date of Inception)
December 31, 1999 December 31, 1998 to December 31, 1997
----------------- ----------------- --------------------
<S> <C> <C> <C>
Statement of Operations
Data:
Revenue................. $ 1,664,824 $ 419,866 $ --
----------- ----------- -----------
Expenses:
Cost of sales.......... 850,483 178,492 --
Operations,
administration and
maintenance........... 133,202 18,056 --
Sales and marketing.... 149,119 26,194 1,366
Network development.... 26,153 10,962 78
General and
administrative........ 210,107 26,303 1,618
Stock related expense
...................... 51,306 39,374 --
Depreciation and
amortization.......... 124,294 541 39
Goodwill and
intangibles
amortization.......... 127,621 -- --
Termination of advisory
services agreement ... -- 139,669 --
----------- ----------- -----------
1,672,285 439,591 3,101
----------- ----------- -----------
Operating loss.......... (7,461) (19,725) (3,101)
Equity in income (loss)
of affiliates.......... 15,708 (2,508) --
Minority interest....... (1,338) -- --
Other income (expense):
Interest income........ 67,407 29,986 2,941
Interest expense....... (139,077) (42,880) --
Other income, net...... 180,765 -- --
Provision for income
taxes.................. (126,539) (33,067) --
----------- ----------- -----------
Loss before
extraordinary item and
cumulative effect of
change in accounting
principle.............. (10,535) (68,194) (160)
Extraordinary loss on
retirement of debt..... (45,681) (19,709) --
----------- ----------- -----------
Loss before cumulative
effect of change in
accounting principle... (56,216) (87,903) (160)
Cumulative effect of
change in accounting
principle, net of
income tax benefit of
$1,400................. (14,710) -- --
----------- ----------- -----------
Net loss................ (70,926) (87,903) (160)
Preferred stock
dividends.............. (66,642) (12,681) (12,690)
Redemption of preferred
stock.................. -- (34,140) --
----------- ----------- -----------
Net loss applicable to
common shareholders.... $ (137,568) $ (134,724) $ (12,850)
=========== =========== ===========
Net Loss Per Common
Share:
Loss applicable to
common shareholders
before extraordinary
item and cumulative
effect of change in
accounting principle
Basic and diluted....... $ (0.15) $ (0.32) $ (0.04)
=========== =========== ===========
Extraordinary item
Basic and diluted...... $ (0.09) $ (0.06) $ --
=========== =========== ===========
Cumulative effect of
change in accounting
principle
Basic and diluted...... $ (0.03) $ -- $ --
=========== =========== ===========
Net loss applicable to
common shareholders
Basic and diluted...... $ (0.27) $ (0.38) $ (0.04)
=========== =========== ===========
Shares used in computing
basic and diluted loss
per share.............. 502,400,851 358,735,340 325,773,934
=========== =========== ===========
Other Operating Data:
Cash from operating
activities............. $ 506,084 $ 208,727 $ 5,121
Cash used for investing
activities............. (4,009,977) (430,697) (428,743)
Cash from financing
activities............. 4,330,799 1,027,110 425,075
Adjusted EBITDA ........ $ 708,181 $ 364,948 $ 343,233
</TABLE>
10
<PAGE>
Global Crossing Ltd. and Subsidiaries
(in thousands)
<TABLE>
<CAPTION>
December 31,
---------------------------------
1999 1998 1997
----------- ---------- --------
<S> <C> <C> <C>
Balance sheet data:
Current assets including cash and cash
equivalents and restricted cash and cash
equivalents................................ $ 2,946,533 $ 976,615 $ 27,744
Long term restricted cash and cash
equivalents................................ 138,118 367,600 --
Long term accounts receivable............... 52,052 43,315 --
Capacity available for sale................. -- 574,849 --
Property and equipment, net ................ 6,026,053 433,707 518,519
Other assets................................ 661,442 65,757 25,934
Investment in and advances to/from
affiliates, net............................ 323,960 177,334 --
Goodwill and intangibles, net............... 9,557,422 -- --
----------- ---------- --------
Total assets............................... $19,705,580 $2,639,177 $572,197
=========== ========== ========
Current liabilities......................... $ 1,852,593 $ 256,265 $ 90,817
Long term debt.............................. 5,018,544 1,066,093 312,325
Deferred revenue............................ 383,287 25,325 --
Deferred credits and other.................. 796,606 34,174 3,009
----------- ---------- --------
Total Liabilities........................... 8,051,030 1,381,857 406,151
Minority interest........................... 351,338 -- --
Mandatorily redeemable and cumulative
convertible preferred stock ............... 2,084,697 483,000 91,925
Shareholders' equity
Common stock............................... 7,992 4,328 3,258
Treasury stock............................. (209,415) (209,415) --
Other shareholders' equity................. 9,578,927 1,067,470 71,023
Accumulated deficit........................ (158,989) (88,063) (160)
----------- ---------- --------
Total shareholders' equity.................. 9,218,515 774,320 74,121
----------- ---------- --------
Total liabilities and shareholders' equity.. $19,705,580 $2,639,177 $572,197
=========== ========== ========
</TABLE>
11
<PAGE>
Global Crossing Holdings selected historical financial information
The table below shows selected historical financial information for Global
Crossing Holdings. This information has been prepared using the consolidated
financial statements of Global Crossing Holdings as of the dates indicated and
for each of the fiscal years in the period from inception, March 19, 1997, to
December 31, 1999. The consolidated income statement data below for each of the
fiscal years in the period from inception, March 19, 1997, to December 31, 1999
and the consolidated balance sheet data as of December 31, 1999 and 1998 have
been derived from financial statements audited by Arthur Andersen, independent
public accountants, which are incorporated by reference in this document. We
derived the remaining data from unaudited condensed consolidated financial
statements.
<TABLE>
<CAPTION>
For the Year For the Year For the period from
Ended Ended March 19, 1997 to
December 31, 1999 December 31, 1998 December 31, 1997
----------------- ----------------- -------------------
(in thousands)
<S> <C> <C> <C>
Revenue................. $ 945,110 $ 419,866 $ --
Income (loss) from
continuing operations.. $ (12,198) $ (29,406) $ (160)
Total assets ........... $8,321,773 $2,644,900 $572,197
Long-term obligations,
including redeemable
preferred stock ....... $3,946,493 $1,555,486 $315,334
</TABLE>
Global Marine Systems selected historical financial information
The table below shows selected historical financial information for Global
Marine Systems presented in United States GAAP. This information has been
prepared using the combined financial statements of Global Marine Systems as of
the dates indicated and for each of the fiscal years in the five-year period
ended March 31, 1999. The combined income statement data below for each of the
three fiscal years ended March 31, 1999 and the combined balance sheet data at
March 31, 1999 and 1998 were derived from financial statements audited by KPMG
Audit Plc, chartered accountants, which are incorporated by reference in this
document. The combined income statement data below for each of the fiscal years
ended March 31, 1996 and 1995 and the combined balance sheet data as of
March 31, 1997, 1996 and 1995 were derived from management accounts.
The unaudited translations of Global Marine Systems' sterling amounts into
United States dollars have been translated using convenience translation rates
for the fiscal year ended March 31, 1999. The convenience translations should
not be construed as representations that the sterling amounts have been, could
have been or could in the future be converted into United States dollars at
this rate or any other rate of exchange.
<TABLE>
<CAPTION>
For the Years Ended March 31,
----------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------------------ --------------- --------------- --------------- ---------------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Operating revenues...... $347,335 (Pounds)209,997 (Pounds)170,953 (Pounds)181,987 (Pounds)147,996 (Pounds) 79,778
Income from continuing
operations............. 47,051 28,447 13,843 18,992 26,923 10,829
Total assets............ 753,333 466,749 441,899 380,635 359,148 235,459
Long-term obligations... $261,923 (Pounds)162,282 (Pounds)198,055 (Pounds)163,209 (Pounds)167,454 (Pounds) 54,900
</TABLE>
12
<PAGE>
Frontier selected historical financial information
The table below shows selected historical financial information for
Frontier. This information has been prepared using the consolidated financial
statements of Frontier as of the dates indicated and for each of the fiscal
years in the five-year period ended December 31, 1998 and for the nine months
ended September 30, 1999 and 1998. The consolidated income statement data below
for each of the fiscal years in the five-year period ending December 31, 1998
and the consolidated balance sheet data as of December 31, 1994 through
December 31, 1998 have been derived from financial statements audited by
PricewaterhouseCoopers LLP, independent accountants, of which the financial
statements for the three-year period ending December 31, 1998 are incorporated
by reference in this document. Global Crossing Ltd. derived the remaining data
from unaudited consolidated financial statements, which are incorporated by
reference in this document.
Revenues have been impacted by the following acquisitions for the periods
presented:
. On February 27, 1998, Frontier acquired GlobalCenter Inc., a leading
provider in digital distribution, Internet and data services
headquartered in Sunnyvale, California. Frontier acquired all of the
outstanding shares of GlobalCenter and issued 6.4 million shares to
effect this merger. At the time of the merger, GlobalCenter had 1.1
million stock options and warrants outstanding as converted into
Frontier equivalents. This transaction was accounted for using the
pooling of interests method of accounting and, accordingly, historical
information has been restated to include GlobalCenter.
. In August 1995, Frontier merged with ALC Communications Corporation.
Frontier exchanged two shares of its common stock for each ALC common
share. The total shares issued by Frontier to effect the merger were
69.2 million. In March 1995, Frontier acquired American Sharecom Inc.
Frontier acquired all of the outstanding shares of American Sharecom for
approximately 8.7 million shares of Frontier common stock. These
transactions were accounted for as poolings of interests and,
accordingly, historical information has been restated to include ALC and
American Sharecom.
. In 1995, Frontier paid $318.4 million in cash for several acquisitions
that were accounted for as purchases. These purchase acquisitions were
Minnesota Southern Cellular Telephone Company, ConferTech International,
Inc., WCT Communications, Inc., Enhanced Telemanagement, Schneider
Communications, Inc. and Schneider Communications' 80.8 percent interest
in LinkUSA Corporation and Link-VTC, Inc. In February 1996, Frontier
acquired the remaining 19.2 percent interest in LinkUSA Corporation for
$2.3 million in cash, and in June 1996 made a payment of $4.3 million to
Link-VTC, Inc. in settlement of the original earnout agreement.
The following extraordinary, unusual or infrequently occurring items have
impacted net income for the periods presented:
. During the nine-month period ended September 30, 1999, Frontier recorded
a $74.5 million charge for costs related to the merger with Global
Crossing Ltd. These charges primarily include investment banker fees,
legal fees, accelerated restricted stock compensation and other direct
costs.
. In the first quarter of 1998, Frontier recorded a pre-tax charge of $6.5
million associated with the acquisition of GlobalCenter. These charges
included investment banker fees, legal fees and other direct costs.
. In October 1997, Frontier recorded a pre-tax charge of $86.8 million
consisting of a restructuring charge of $43.0 million and a provision
for asset and lease impairments of $43.8 million. The restructuring
charge was primarily associated with a workforce reduction, program
cancellations and discontinuing some product lines. The provision for
asset and lease impairments primarily relates to long term assets and
some lease obligations Frontier was in the process of disposing of or
exiting.
13
<PAGE>
. In March 1997, Frontier recorded a $96.6 million pre-tax charge
primarily related to the write-off of certain leased network facilities
no longer required as a result of the migration of Frontier's major
carrier customer's one-plus traffic volume to other networks and
Frontier's overall network integration efforts.
. In November 1996, Frontier recorded a $48.8 million pre-tax charge. This
charge included $28.0 million for the curtailment of specified Frontier
pension plans and a $20.8 million charge primarily to the write-off of
unrecoverable product development costs for its conference calling
product line.
. In December 1996, Frontier, through GlobalCenter, recorded a pre-tax
charge of $18.9 million related to the write-off of in-process product
development costs associated with the 1996 merger with GCIS, an Internet
management services company.
. Frontier's 1995 operating results reflect pre-tax acquisition related
charges of $114.2 million associated with the integration of a number of
long distance companies acquired during the year, including the August
1995 merger with ALC Communications.
. Frontier determined in 1995 that Statement of Financial Accounting
Standards No. 71, "Accounting for the Effects of Certain Types of
Regulation", was no longer applicable based upon changes in regulation,
increasingly rapid advancements in telecommunications technology and
other factors creating competitive markets. As a result of the
discontinuance of FAS 71, Frontier recorded a non-cash extraordinary
charge of $112.1 million, net of an income tax benefit of $68.4 million,
as of September 30, 1995. Frontier also recorded a $9.0 million loss on
the early extinguishment of debt in 1995.
14
<PAGE>
Frontier Corporation and Subsidiaries
(in thousands, except per share information)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended Year Ended December 31,
September 30, September 30, ----------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------------- ------------- ---------- ---------- ---------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statements
of Income:
Revenues................ $ 1,995,556 $1,938,522 $2,593,558 $2,374,809 $2,588,519 $2,150,328 $1,667,545
Costs and expenses...... 1,835,514 1,708,518 2,276,162 2,288,651 2,220,296 1,865,492 1,341,919
----------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income........ 160,042 230,004 317,396 86,158 368,223 284,836 325,626
Interest expense........ 48,739 39,516 55,318 48,239 43,312 53,572 50,216
Other income, net of
other expense.......... 19,643 33,480 45,025 38,070 15,850 14,991 20,922
Income taxes............ 77,181 96,634 129,560 44,188 142,556 101,126 109,078
----------- ---------- ---------- ---------- ---------- ---------- ----------
Income before
extraordinary items and
cumulative effect of
changes in accounting
principles............. 53,765 127,334 177,543 31,801 198,205 145,129 187,254
Extraordinary items..... -- -- -- -- -- (121,208) --
Cumulative effect of
changes in accounting
principles............. -- (1,755) (1,755) -- (8,018) (1,477) (7,197)
----------- ---------- ---------- ---------- ---------- ---------- ----------
Consolidated net
income................. 53,765 125,579 175,788 31,801 190,187 22,444 180,057
Dividends on preferred
stock.................. (510) (754) (1,005) (1,019) (1,182) (1,191) (1,187)
----------- ---------- ---------- ---------- ---------- ---------- ----------
Income applicable to
common stock........... $ 53,255 $ 124,825 $ 174,783 $ 30,782 $ 189,005 $ 21,253 $ 178,870
=========== ========== ========== ========== ========== ========== ==========
Earnings per common
share:
Income before
extraordinary item and
cumulative effect of
changes in accounting
principles
Basic.................. $ 1.03 $ .18 $ 1.19 $ .94 $ 1.26
Diluted................ 1.02 .18 1.18 .88 1.16
Cash dividends declared
per common share....... $ .100 $ .668 $ .89 $ .875 $ .855 $ .835 $ .815
Consolidated Balance
Sheets (at period end):
Current assets.......... $ 644,023 $ 566,674 $ 490,305 $ 477,761 $ 524,200 $ 673,826
Property, plant and
equipment, net......... 2,189,138 1,677,559 1,046,884 975,982 883,046 1,034,442
Goodwill and customer
base, net.............. 7,794,241 484,015 517,754 538,296 550,081 222,442
Deferred and other
assets................. 431,614 330,495 432,977 237,353 154,088 130,084
----------- ---------- ---------- ---------- ---------- ----------
Total assets........... $11,059,016 $3,058,743 $2,487,920 $2,229,392 $2,111,415 $2,060,794
=========== ========== ========== ========== ========== ==========
Current liabilities..... $ 750,974 $ 567,697 $ 492,978 $ 424,397 $ 506,073 $ 305,698
Long-term debt.......... 1,800,651 1,350,821 934,681 677,570 618,867 661,549
Other long-term
liabilities............ 31,928 -- -- -- -- --
Deferred income taxes... -- 40,046 10,927 2,542 15,644 98,217
Deferred employee
benefits obligation.... 89,596 81,925 74,965 57,573 58,385 46,001
Shareholder's equity.... 8,385,867 1,018,254 974,369 1,067,310 912,446 949,329
----------- ---------- ---------- ---------- ---------- ----------
Total liabilities and
shareholders' equity.. $11,059,016 $3,058,743 $2,487,920 $2,229,392 $2,111,415 $2,060,794
=========== ========== ========== ========== ========== ==========
</TABLE>
15
<PAGE>
Racal Telecom selected historical financial information
The table below shows selected historical financial information for Racal
Telecom prepared in United States GAAP. This information has been prepared
using the combined financial statements of Racal Telecom as of the dates
indicated and for each of the fiscal years in the three-year period ended March
31, 1999. The combined income statement data below for each of the two years
ended March 31, 1999 and the combined balance sheet data at March 31, 1999 and
1998 were derived from financial statements audited by Deloitte & Touche,
independent auditors, which are incorporated by reference in this document. We
derived the remaining data from unaudited combined financial statements.
The unaudited translations of Racal Telecom's sterling amounts into United
States dollars have been translated using convenience translation rates for the
fiscal year ended March 31, 1999. The convenience translations should not be
construed as representations that the sterling amounts have been, could have
been or could in the future be converted into United States dollars at this
rate or any other rate of exchange.
<TABLE>
<CAPTION>
For the Years Ended March 31,
------------------------------------------------------------
1999 1998 1997
--------------------------- --------------- ---------------
(unaudited) (in thousands)
<S> <C> <C> <C> <C>
Revenues................ $492,130 (Pounds)295,800 (Pounds)273,000 (Pounds)260,000
Income (loss) from
continuing operations.. (30,450) (18,300) 12,100 16,000
Total assets............ 656,250 401,200 355,900 311,700
Long-term obligations... $118,920 (Pounds) 72,700 (Pounds) 86,400 (Pounds)101,200
</TABLE>
HCL Holdings selected historical financial information
The table below shows selected historical financial information for HCL
Holdings prepared in United States GAAP. This information has been prepared
using the combined financial statements of HCL Holdings as of the dates
indicated and for each of the years in the three-year period ended December 31,
1998 and for the nine months ended September 30, 1999 and 1998. The combined
financial information below as of and for each of the three years ended
December 31, 1998 were derived from financial statements audited by
PricewaterhouseCoopers, certified public accountants, which are incorporated by
reference in this document. The combined financial information below as of and
for the nine months ended September 30, 1999 and 1998 were derived from
unaudited combined financial statements.
<TABLE>
<CAPTION>
For the Nine For the Nine
Months Ended Months Ended For the Years Ended December 31,
September 30, September 30, --------------------------------------
1999 1998 1998 1997 1996
------------- ------------- ------------ ------------ ----------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C>
Revenues................ HK$ 615,940 HK$ 735,933 HK$ 950,120 HK$1,262,106 HK$790,995
Income (loss) from
continuing operations.. (190,748) HK$(177,318) (279,526) (356,847) (153,626)
Total assets............ 2,364,497 1,857,539 1,369,610 705,687
Long-term obligations... HK$3,022,594 HK$2,306,024 HK$1,403,847 HK$704,586
</TABLE>
16
<PAGE>
The unaudited translations of HCL Holdings' Hong Kong dollar amounts into
United States dollars have been translated using convenience translation rates
for the fiscal year ended December 31, 1998 and for the nine months ended
September 30, 1999. The convenience translations should not be construed as
representations that the Hong Kong dollar amounts have been, could have been or
could in the future be converted into United States dollars at this rate or any
other rate of exchange.
<TABLE>
<CAPTION>
For the Nine For the Year
Months Ended Ended
September 30, December 31,
1999 1998
------------- ------------
(unaudited)
(in thousands)
<S> <C> <C>
Revenues...................................... $ 79,429 $122,664
Income (loss) from continuing operations...... (24,598) (36,088)
Total assets.................................. 304,401 239,794
Long-term obligations......................... $389,123 $297,690
</TABLE>
17
<PAGE>
Recent Financial Accounting Developments
During the third and fourth quarters of 1999, changes in our business
activities, together with a newly effective accounting standard, caused us to
modify some of our practices regarding recognition of revenue and costs related
to sales of capacity. None of the accounting practices described below affect
our cash flows.
As a result of Financial Accounting Standards Board (FASB) Interpretation
No. 43, "Real Estate Sales, an interpretation of FASB Statement No. 66" (FIN
43), which became effective July 1, 1999, we have accounted revenue from
terrestrial circuits sold after that date as operating leases and have
amortized that revenue over the terms of the related contracts. Previously, we
had recognized these sales as current revenue upon activation of the circuits.
This deferral in revenue recognition has no impact on cash flow.
With the consummation of the Frontier acquisition on September 28, 1999,
service offerings became a significant source of our revenue. Consequently, we
initiated service contract accounting for our subsea systems during the fourth
quarter of 1999, because we, since that date, no longer hold subsea capacity
exclusively for sale. As a result, since the beginning of the fourth quarter,
we have depreciated investments in both subsea and terrestrial systems over
their remaining economic lives and have recognized revenue related to service
contracts over the terms of the contracts. We have recognized revenue and costs
related to the sale of subsea circuits upon activation, if the criteria of
sales-type lease accounting have been satisfied with respect to those circuits.
During the fourth quarter of 1999, our global network service capabilities
were significantly expanded by the activation of several previously announced
systems and by the integration of other networks obtained through acquisition
and joint venture agreements. With this network expansion, we began offering
our customers flexible bandwidth products to multiple destinations, which makes
the historical practice of fixed, point-to-point routing of traffic and
restoration capacity both impractical and inefficient. To ensure the required
network flexibility, we will modify our future capacity purchase agreements and
our network management in a manner that precludes the use of sales-type lease
accounting.
Because of these contract changes and the network management required to
meet customer demands for flexible bandwidth, multiple destinations and system
performance, we anticipate that most of the contracts for subsea circuits
entered into after January 1, 2000 will be part of a service offering and,
therefore, will not meet the criteria of sales-type lease accounting and will
be accounted for as operating leases. Consequently, we will defer revenue
related to those circuits and amortize it over the appropriate term of the
contract. In certain circumstances, if a contract meets all of the requirements
of sales-type lease accounting, we will recognize revenue without deferral upon
payment and activation.
We note that accounting practice and authoritative guidance regarding the
applicability of sales-type lease accounting to the sale of capacity is still
evolving. Based on the accounting practices described above, we believe that
additional changes, if any, in accounting practice or authoritative guidance
affecting sales of capacity would have little or no impact on our results of
operations.
18
<PAGE>
Global Crossing Ltd.
Selected Unaudited Pro Forma Financial Information
The following unaudited pro forma condensed combined financial information
of Global Crossing Ltd., Global Marine Systems, Frontier, Racal Telecom and the
Hutchison Global Crossing joint venture, which we refer to as "Pro Forma Global
Crossing Ltd.", has been prepared to demonstrate how these companies or
businesses might have looked if (1) the Global Marine Systems acquisition and
related financing, (2) the Frontier acquisition, (3) the Racal Telecom
acquisition and related financing, (4) the Hutchison Global Crossing joint
venture, including the related issuance of the 6 3/8% cumulative convertible
preferred stock, series B, of Global Crossing Ltd., (5) the offering of Global
Crossing Ltd.'s 6 3/8% cumulative convertible preferred stock completed on
November 5, 1999, (6) the offering of our 9 1/8% senior notes due 2006 and 9
1/2% senior notes due 2009 completed on November 19, 1999 and (7) the offering
of Global Crossing Ltd.'s 7% cumulative convertible preferred stock completed
on December 15, 1999 had been completed as of the date or at the beginning of
the period presented. This pro forma information does not give effect to (a)
the $350 million cash received in connection with the formation of the Asia
Global Crossing joint venture, (b) the IPC and IXnet mergers or (c) the sale of
4 million shares of 6 3/4% cumulative convertible preferred stock and 43
million shares of common stock of Global Crossing Ltd. completed on April 14,
2000.
We have prepared the pro forma financial information using the purchase
method of accounting. Global Crossing Ltd. expects that it will have
reorganization and restructuring expenses and potential synergies relating to
the acquisitions of Global Marine Systems and Racal Telecom, the Hutchison
Global Crossing joint venture and the acquisition of Frontier's long distance
business and increased opportunities to earn more revenue as a result of those
transactions. The unaudited pro forma information does not reflect these
expenses and synergies.
The pro forma information, while helpful in illustrating the financial
characteristics of the combined company under one set of assumptions, does not
attempt to predict or suggest future results. The pro forma information also
does not attempt to show how the combined company would actually have performed
had the companies been combined throughout these periods. If the companies had
actually been combined in prior periods, these companies and businesses might
have performed differently. You should not rely on pro forma financial
information as an indication of the results that would have been achieved if
the Global Marine Systems, Frontier and Racal Telecom acquisitions and the
Hutchison Global Crossing joint venture had taken place earlier or the future
results that the companies will experience after completion of these
transactions.
You should read these unaudited pro forma condensed combined financial
statements in conjunction with the historical financial statements of Global
Crossing Ltd., Global Marine Systems, Frontier, Racal Telecom and HCL Holdings,
which are incorporated by reference in this document.
19
<PAGE>
Pro Forma Global Crossing Ltd.
Unaudited Pro Forma Condensed Combined Balance Sheet
as of December 31, 1999
(in thousands)
<TABLE>
<CAPTION>
Global Hutchison Global
Crossing Global Crossing Crossing
Historical(1) Adjustments(2) Pro Forma
------------- --------------- -----------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash, restricted cash and
investments....................... $ 1,726,793 $(50,000) $ 1,676,793
Accounts receivable, net........... 966,973 -- 966,973
Other assets and prepaid costs..... 252,767 -- 252,767
----------- -------- -----------
Total Current Assets............. 2,946,533 (50,000) 2,896,533
Restricted cash and cash
equivalents........................ 138,118 -- 138,118
Accounts receivable................. 52,052 -- 52,052
Property and equipment, net......... 6,026,053 (83,800) 5,942,253
Goodwill and other intangibles,
net................................ 9,557,422 -- 9,557,422
Investment in and advances to/from
affiliates, net.................... 323,960 538,800 862,760
Other assets, net................... 661,442 -- 661,442
----------- -------- -----------
Total Assets..................... $19,705,580 $405,000 $20,110,580
=========== ======== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accrued construction costs......... $ 275,361 $ -- $ 275,361
Accounts payable and accrued
liabilities....................... 944,780 5,000 949,780
Accrued interest and preferred
dividends......................... 66,745 -- 66,745
Deferred revenue................... 127,367 -- 127,367
Income taxes payable............... 140,034 -- 140,034
Current portion of long term
debt.............................. 5,496 -- 5,496
Other current liabilities.......... 292,810 -- 292,810
----------- -------- -----------
Total Current Liabilities........ 1,852,593 5,000 1,857,593
Long term debt..................... 5,018,544 -- 5,018,544
Deferred revenue................... 383,287 -- 383,287
Deferred credits and other......... 796,606 -- 796,606
----------- -------- -----------
Total Liabilities................ 8,051,030 5,000 8,056,030
----------- -------- -----------
MINORITY INTEREST................... 351,338 -- 351,338
----------- -------- -----------
MANDATORILY REDEEMABLE AND
CUMULATIVE CONVERTIBLE PREFERRED
STOCK:
10 1/2% Mandatorily Redeemable
Preferred Stock, 5,000,000 shares
issued and outstanding as of
December 31, 1999, $100
liquidation preference per
share............................. 485,947 -- 485,947
----------- -------- -----------
6 3/8% Cumulative Convertible
Preferred Stock, 10,000,000
shares issued and outstanding as
of December 31, 1999, $100
liquidation preference per
share............................. 969,000 400,000 1,369,000
----------- -------- -----------
7% Cumulative Convertible
Preferred Stock, 2,600,000 and no
shares issued and outstanding as
of December 31, 1999, $250
liquidation preference per
share............................. 629,750 -- 629,750
----------- -------- -----------
SHAREHOLDERS' EQUITY:
Common stock, 3,000,000,000 shares
authorized, par value $.01,
799,137,142 issued as of December
31, 1999.......................... 7,992 -- 7,992
Treasury stock, 22,033,758
shares............................ (209,415) -- (209,415)
Other shareholders' equity......... 9,578,927 -- 9,578,927
Accumulated deficit................ (158,989) -- (158,989)
----------- -------- -----------
9,218,515 -- 9,218,515
----------- -------- -----------
Total Liabilities and
Shareholder's Equity............ $19,705,580 $405,000 $20,110,580
=========== ======== ===========
</TABLE>
20
<PAGE>
Pro Forma Global Crossing Ltd.
Unaudited Pro Forma Condensed Combined Statements of Operations
For the Year Ended December 31, 1999
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Global
Global Global Marine Marine Racal
Crossing Systems Systems Frontier Frontier Racal Telecom Telecom
Historical(3) Historical(4) Adjustments Historical(8) Adjustments Historical(13) Adjustments
------------- ------------- ----------- ------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating
Revenues........... $ 1,664,824 $173,498 $ -- $1,995,556 $ -- $306,019 $ --
----------- -------- -------- ---------- --------- -------- ---------
Operating Expenses:
Operating,
selling, general
and
administrative.... 1,369,064 127,165 -- 1,551,234 -- 286,442 --
Stock-related
expense........... 51,306 -- -- 10,412 (10,412)(9) -- --
Merger Expenses... -- -- -- 74,519 -- 24,600 --
Depreciation and
amortization...... 124,294 12,817 -- 173,600 -- 52,716 --
Goodwill and
intangibles
amortization...... 127,621 812 (812)(5) 25,749 (25,749)(10) -- 55,843 (14)
19,690 (5) 303,774 (10)
----------- -------- -------- ---------- --------- -------- ---------
1,672,285 140,794 18,878 1,835,514 267,613 363,758 55,843
----------- -------- -------- ---------- --------- -------- ---------
Operating income
(loss)............. (7,461) 32,704 (18,878) 160,042 (267,613) (57,739) (55,843)
Equity in income
(loss) of
affiliates......... 15,708 4,539 -- 17,235 -- (560) --
Minority interest.. (1,338) -- -- -- -- -- --
Other income
(expense):
Interest
expense........... (139,077) (6,869) (24,000)(6) (48,739) -- (30,908) (96,363)(15)
Interest income... 67,407 511 -- 4,754 -- 3,856 --
Other income
(expenses)........ 180,765 143 -- (2,346) -- 369 --
----------- -------- -------- ---------- --------- -------- ---------
Income (loss)
before provision
for income taxes,
extraordinary item
and cumulative
effect of change in
accounting
principle.......... 116,004 31,028 (42,878) 130,946 (267,613) (84,982) (152,206)
(Provision)
benefit for
income taxes...... (126,539) (11,885) 7,200 (7) (77,181) -- 30,116 23,115 (16)
----------- -------- -------- ---------- --------- -------- ---------
Income (loss)
before
extraordinary item
and cumulative
effect of change in
accounting
principle.......... (10,535) 19,143 (35,678) 53,765 (267,613) (54,866) (129,091)
Preferred stock
dividends......... (66,642) -- -- (510) 510 (11) -- --
----------- -------- -------- ---------- --------- -------- ---------
Income (loss)
applicable to
common shareholders
before
extraordinary item
and cumulative
effect of change in
accounting
principle.......... (77,177) 19,143 (35,678) 53,255 (267,103) (54,866) (129,091)
Diluted earnings
adjustment........ -- -- -- 270 (270)(12) -- --
----------- -------- -------- ---------- --------- -------- ---------
Income (loss)
applicable to
common shareholders
before
extrarordinary item
and cumulative
effect of change in
accounting
principle
(Diluted).......... $ (77,177) $ 19,143 $(35,678) $ 53,525 $(267,373) $(54,866) $(129,091)
=========== ======== ======== ========== ========= ======== =========
Income (loss) per
common share:
Income (loss)
applicable to
common
shareholders
before
extraordinary
item and
cumulative effect
of change in
accounting principle
Basic and
diluted......... $ (0.15)
===========
Shares used in
computing
information
applicable to
common
shareholders
Basic and
diluted......... 502,400,851
===========
<CAPTION>
Hutchison
Global Global
Crossing Financing Crossing
Adjustments(2) Adjustments(17) Pro Forma
-------------- --------------- ----------------
<S> <C> <C> <C>
Operating
Revenues........... $ -- $ -- $ 4,139,897
-------------- --------------- ----------------
Operating Expenses:
Operating,
selling, general
and
administrative.... -- -- 3,333,905
Stock-related
expense........... -- -- 51,306
Merger Expenses... -- -- 99,119
Depreciation and
amortization...... -- -- 363,427
Goodwill and
intangibles
amortization...... -- -- 506,928
-------------- --------------- ----------------
-- -- 4,354,685
-------------- --------------- ----------------
Operating income
(loss)............. -- -- (214,788)
Equity in income
(loss) of
affiliates......... (15,825) -- (143)
(21,240) --
Minority interest.. -- (1,338)
Other income
(expense):
Interest
expense........... -- 93,577 (495,695)
(243,316)
Interest income... -- -- 76,528
Other income
(expenses)........ -- -- 178,931
-------------- --------------- ----------------
Income (loss)
before provision
for income taxes,
extraordinary item
and cumulative
effect of change in
accounting
principle.......... (37,065) (149,739) (456,505)
(Provision)
benefit for
income taxes...... -- (7,200) (162,374)
-------------- --------------- ----------------
Income (loss)
before
extraordinary item
and cumulative
effect of change in
accounting
principle.......... (37,065) (156,939) (618,879)
Preferred stock
dividends......... (25,529) (108,936) (201,107)
-------------- --------------- ----------------
Income (loss)
applicable to
common shareholders
before
extraordinary item
and cumulative
effect of change in
accounting
principle.......... (62,594) (265,875) (819,986)
Diluted earnings
adjustment........ -- --
-------------- --------------- ----------------
Income (loss)
applicable to
common shareholders
before
extrarordinary item
and cumulative
effect of change in
accounting
principle
(Diluted).......... $(62,594) $(265,875) $ (819,986)
============== =============== ================
Income (loss) per
common share:
Income (loss)
applicable to
common
shareholders
before
extraordinary
item and
cumulative effect
of change in
accounting principle
Basic and
diluted......... $ (1.07)
================
Shares used in
computing
information
applicable to
common
shareholders
Basic and
diluted......... 767,355,151 (18)
================
</TABLE>
21
<PAGE>
Pro Forma Global Crossing Ltd.
Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
(1) This column represents the historical financial position of Global
Crossing Ltd. as of December 31, 1999, including the assets acquired in
the Frontier merger and the Global Marine Systems and Racal Telecom
acquisitions.
(2) On January 12, 2000, we and Hutchison Whampoa Limited formed a joint
venture called Hutchison Global Crossing. This joint venture is owned in
equal parts by us and Hutchison Whampoa. In exchange for its 50%
interest, Hutchison Whampoa contributed to the joint venture its existing
building-to-building fixed-line telecommunications network in Hong Kong
and certain Internet-related assets previously held by Hutchison
Telecommunications Limited. In exchange for our 50% interest, we
contributed to the joint venture international telecommunications
capacity rights on our network and know-how related to Internet data
centers valued at $350 million and $50 million in cash. In addition,
Global Crossing Ltd. issued to Hutchison Whampoa $400 million aggregate
liquidation preference of its 6 3/8% cumulative convertible preferred
stock, series B, convertible into Global Crossing Ltd.'s common stock.
The Hutchison Global Crossing joint venture is anticipated to be
accounted for as an unconsolidated joint venture under the equity method
of accounting.
<TABLE>
<S> <C> <C>
Total Consideration
Cash contributed................................... $ 50,000
6 3/8% Cumulative Convertible Preferred Stock,
Series B.......................................... 400,000
Estimated cost of capacity contributed............. 83,800
Global Crossing transaction costs.................. 5,000
--------
Total consideration.................................. 538,800
Less:Historical net tangible book value of HCL
Holdings:
Historical HCL Holdings net liabilities at December
31, 1999........................................... $(149,393)
Cash contributed................................... 50,000
Estimated cost of capacity contributed............. 83,800
---------
Adjusted net tangible book value................... (15,593)
50% ownership interest............................. 7,797
---------
(7,796)
--------
Total Goodwill....................................... $546,596
========
</TABLE>
Global Crossing Ltd. has tentatively considered the carrying value of the
acquired assets to approximate their fair value, with all of the excess of
those acquisition costs being attributable to goodwill. Global Crossing
Ltd. is in the process of fully evaluating the assets to be acquired and,
as a result, the purchase price allocation among the tangible and
intangible assets acquired and their useful lives may change. Global
Crossing Ltd. currently anticipates that goodwill associated with the
merger will be amortized over a 25-year life.
These adjustments also include the assumed equity in the results of
operations of Hutchison Global Crossing for the year ended December 31,
1999.
(3) This column represents the historical results of operations for the year
ended December 31, 1999 including the results of Global Marine Systems
operations for the six months ended December 31, 1999, the results of
Frontier operations for the three months ended December 31, 1999 and
Racal Telecom for the period from November 24, 1999 to December 31, 1999.
(4) This column represents the historical results of operations of Global
Marine Systems for the six months ended June 30, 1999.
22
<PAGE>
(5) These adjustments reflect the amortization expense of the excess
consideration over the net assets acquired (goodwill), which Global
Crossing Ltd. has estimated to be approximately $693 million. Global
Crossing Ltd. is amortizing goodwill and other intangible assets on the
straight-line method over 3-25 years. The initial purchase price
allocation is based on current estimates. Global Crossing Ltd. will make
the final purchase price allocation based upon final values for certain
assets and liabilities. As a result, the final purchase price allocation
may differ from the presented estimate.
(6) This amount reflects the assumed interest expense, at an 8% interest rate,
incurred on the $600 million debt assumed issued as of the earliest date
presented in connection with the acquisition of Global Marine Systems.
(7) This adjustment represents the tax benefit resulting from the interest
expense assumed in connection with the debt issued for the acquisition of
Global Marine Systems.
(8) This column represents Frontier's historical results of operations for the
nine months ended September 30, 1999.
(9) This adjustment assumes Frontier's stock related expenses would not have
been incurred had the merger occurred at the earliest date presented.
(10) These adjustments reflect the amortization expense of the excess
consideration over the net assets acquired (goodwill), which Global
Crossing Ltd. has estimated to be approximately $7.7 billion. Global
Crossing Ltd. is amortizing goodwill and other intangible assets on a
straight-line method over 6-25 years. The initial purchase price
allocation is based on current estimates. Global Crossing Ltd. will make
the final purchase price allocation based upon final values for certain
assets and liabilities. As a result, the final purchase price allocation
may differ from the presented estimate.
(11) This adjustment assumes that Frontier's preferred stock dividends would
not have been incurred, as Frontier's preferred stock would have been
redeemed as of the earliest date presented.
(12) To eliminate diluted earnings adjustment due to the combined net loss
position.
(13) This column represents Racal Telecom's results from operations in United
States GAAP, the disposal of the Racal Translink and Racal Fieldforce
divisions of Racal Telecommunications Limited which Global Crossing Ltd.
did not acquire and pro forma adjustments to reflect the likely effect of
the trading among Racal Translink, Racal Fieldforce and Racal Telecom
based on contractual obligations among the divisions. We summarize these
adjustments in the table below:
23
<PAGE>
Racal Telecom Pro Forma
Unaudited Pro Forma Condensed Combined Statements of Operations
For the period from January 1, 1999 to November 23, 1999
(in thousands)
<TABLE>
<CAPTION>
US GAAP and Racal
BV Acquisition Accounting Telecom Racal
and Carve-Out Policy Interim Telecom
Historical(a) Adjustments Adjustments(d) Period(e) Pro Forma
------------ -------------- -------------- --------- ---------
<S> <C> <C> <C> <C> <C>
Operating Revenues...... $390,578 $(110,354)(c) $(22,447) $47,937 $306,019
305 (b)
-------- --------- -------- ------- --------
Operating Expenses:
Operating, selling,
general and
administrative........ 355,110 (99,595)(c) 1,737 53,544 311,042
246 (b)
Depreciation and
amortization.......... 61,774 (11,978)(c) (3,340) 6,265 52,716
(5)(b)
-------- --------- -------- ------- --------
416,884 (111,332) (1,603) 59,809 363,758
-------- --------- -------- ------- --------
Operating income
(loss)................. (26,306) 1,283 (20,844) (11,872) (57,739)
Equity in income (loss)
of affiliates.......... (560) -- -- (560)
Other income (expense):
Interest expense....... (30,905) (3)(b) -- -- (30,908)
Interest income........ -- 3,089 (c) -- 767 3,856
Other income
(expense)............. 76,390 (76,021)(c) -- -- 369
-------- --------- -------- ------- --------
Income (loss) before
extraordinary item,
taxes and cumulative
effect of changes in
accounting principle... 18,619 (71,652) (20,844) (11,105) (84,982)
(Provision) benefit for
income taxes.......... 3,563 (70)(b) 18,918 7,705 30,116
-------- --------- -------- ------- --------
Income (loss) before
extraordinary item and
cumulative effect of
changes in accounting
principle.............. $ 22,182 $ (71,722) $ (1,926) $(3,400) $(54,866)
======== ========= ======== ======= ========
</TABLE>
(a) This column represents the combined historical results of operations
of Racal Telecommunications Limited, Racal Telecommunications Networks
Limited, Racal Internet Services Limited and Racal Telecommunications
Inc., which we refer to as "Racal Telecom", in accordance with United
Kingdom GAAP translated into United States dollars for the 41 weeks
ended October 15, 1999.
(b) Global Crossing Ltd. is treated as having acquired the business and
assets of Racal Network Services BV as that company was in the process
of being reorganized into Racal Telecommunications Networks Limited in
the course of 1999. These adjustments reflect the financial position
and results of operations of Racal Network Services BV as if this
transaction had been completed as of the dates or at the beginning of
the periods presented.
(c) In July 1999, the Racal Telecom business was separated into three
divisions: Racal Telecom, Racal Translink and Racal Fieldforce. On
October 1, 1999, the Racal Translink and Racal Fieldforce businesses
were sold to another company within the Racal Electronics plc group.
This adjustment eliminates the results of operations of Racal
Translink and Racal Fieldforce, reflects the likely effect of the
trading among Racal Translink, Racal Fieldforce and Racal Telecom
based on contractual obligations among the divisions and adjusts the
profit on disposal of these operations. No taxation liabilities were
incurred on the disposal as this disposal was to another Racal
Electronics plc group company.
(d) The Racal Telecom combined financial statements are prepared in
accordance with United Kingdom GAAP which differ in certain material
respects from United States GAAP. The differences that are material
are disclosed in the notes to the combined financial statements,
incorporated by reference. In addition, an adjustment has been made to
treat sales of dark fiber made by Racal Telecom after July 1, 1999 as
operating leases, recognizing income over the period of the service
provision in accordance with the provision of FASB Interpretation No
43.
(e) This column represents Racal Telecom's historical results from October
16, 1999 to November 23, 1999.
24
<PAGE>
(14) This adjustment reflects the amortization expense of the excess
consideration over the net assets acquired (goodwill), which Global
Crossing Ltd. has preliminarily estimated to be $1.6 billion. Global
Crossing Ltd. has tentatively considered the carrying value of the
acquired assets to approximate fair value, with all excess of those
acquisition costs being attributable to goodwill. Global Crossing Ltd. is
in the process of fully evaluating the assets to be acquired and, as a
result, the purchase price allocation among the tangible and intangible
assets acquired, and their related useful lives, may change. Global
Crossing Ltd. currently anticipates that goodwill associated with the
transaction will be amortized over a 25-year life.
(15) This amount reflects the assumed interest expense, at a 9% interest rate,
including the amortization of deferred financing fees incurred on the $1.1
billion debt assumed issued as of the earliest date presented in
connection with the acquisition of Racal Telecom.
(16) This adjustment represents the tax benefit resulting from the interest
expense assumed in connection with the debt issued for the acquisition of
Racal Telecom.
(17) These adjustments represent the assumed interest expenses, including
amortization of deferred financing fees, in connection with the issuance
and assumed repayment of existing debt related to our 9 1/8% senior notes
due 2006 and 9 1/2% senior notes due 2009, Global Crossing Ltd.'s 6 3/8%
cumulative convertible preferred stock and Global Crossing Ltd.'s 7%
cumulative convertible preferred stock, including the over-allotment. In
connection with the issuance of our 9 1/8% senior notes due 2006 and 9
1/2% senior notes due 2009, Global Crossing Ltd. incurred approximately
$29.7 million in financing fees. The financing fees will be amortized over
the life of the debt.
(18) Pro forma per share data are based on the number of Global Crossing Ltd.'s
common shares that would have been outstanding had the merger occurred at
the earliest date presented. Global Crossing Ltd. issued 355,181,000
shares in connection with the Frontier merger.
25
<PAGE>
RISK FACTORS
Before you participate in the exchange offer, you should carefully consider
the risks described below and the other information included or incorporated
by reference in this prospectus.
Risk Factors Relating to the Exchange Offer
If you fail to tender your outstanding notes in the exchange offer, then
the liquidity of the market for your notes may be substantially limited.
We expect that a substantial portion of the outstanding notes will be
tendered and accepted in the exchange offer and exchanged for exchange notes.
When the exchange offer is completed, the amount of outstanding notes will be
reduced by the amount of exchange notes that we will issue. Accordingly, we
expect that the liquidity of the market for the outstanding notes after the
exchange offer is completed will be substantially limited.
If you fail to exchange your outstanding notes in the exchange offer, your
outstanding notes will continue to be subject to transfer restrictions.
If you do not exchange your outstanding notes for exchange notes in the
exchange offer, your outstanding notes will continue to be subject to the
transfer restrictions outlined in the offering memorandum distributed in
connection with the offering of the outstanding notes. In general, the
outstanding notes may not be offered or sold unless they are registered or
exempt from registration under the Securities Act and applicable state
securities laws. Except as required by the registration rights agreement, we
do not intend to register resales of the outstanding notes under the
Securities Act.
Risk Factors Relating to the Exchange Notes
The exchange notes will be effectively subordinated to our secured
obligations and to all indebtedness of our subsidiaries.
The exchange notes will be effectively subordinated in right of payment to
all of our secured debt to the extent of the value of the assets securing that
debt. As of December 31, 1999, we had $3,461 million of long-term debt
outstanding, of which $646 million would have been secured.
We are a holding company, and our subsidiaries conduct all of our
operations and own all of our operating assets. We have no significant assets
other than the stock in our subsidiaries. As a result, the exchange notes will
be effectively subordinated to all indebtedness and other liabilities of our
subsidiaries, including trade payables and lease obligations. Our ability to
make required payments on the exchange notes depends on the performance of our
subsidiaries and their ability to distribute funds to us. The ability of our
subsidiaries to make distributions to us may be restricted by, among other
things, credit facilities and other laws and regulations. Under credit
facilities, we may be required to establish cash reserves for the future
payment of principal and interest on the amounts outstanding under the credit
facilities. If we are unable to obtain the funds necessary to pay the
principal amount at maturity of the exchange notes, to redeem the exchange
notes or to repurchase the exchange notes upon the occurrence of a change of
control, we may be required to adopt one or more alternatives, such as a
refinancing of the exchange notes. We cannot assure you that we would be able
to refinance the exchange notes.
We are subject to restrictive covenants.
Covenants in the exchange notes and our other debt limit our ability, among
other things:
. to incur debt;
26
<PAGE>
. to pay dividends and make distributions on capital stock;
. to make investments;
. to enter into new businesses;
. to merge, consolidate or dispose of assets; and
. to enter into transactions with affiliates.
Complying with these covenants may cause us to take actions that we
otherwise would not take or not take actions that we otherwise would take. For
example, these covenants may restrict us from financing capital expenditures
with debt. Our failure to comply with these covenants, including with respect
to the exchange notes, would cause a default, which, if not waived, could
result in the debt, including the exchange notes, becoming immediately due and
payable. In this event, we may not be able to repay or refinance the debt on
terms that are acceptable to us or at all.
We may not be able to fund a change of control offer.
If we become subject to a change of control, we will be required, subject
to a number of conditions, to offer to purchase all outstanding exchange notes
at a price equal to 101% of the principal amount of the exchange notes, plus
any accrued and unpaid interest to the date of purchase. If a change of
control were to occur today, we would not have sufficient funds available to
purchase all of the outstanding exchange notes were they tendered in response
to an offer made as a result of a change of control. We cannot assure you that
we will have sufficient funds available or that we will be permitted by our
other debt instruments to fulfill these obligations upon a change of control
in the future.
Our other debt contains cross-defaults that could hinder our ability to
repay the exchange notes.
Substantially all of our debt, including the exchange notes, contains
cross-defaults that permit the acceleration of our debt upon the acceleration
of, or in some cases upon the occurrence of an event that would permit the
acceleration of, debt in excess of specified amounts. If any cross-defaults
occurred, substantially all of our debt could be subject to acceleration, in
which case we almost certainly would be unable to repay the exchange notes. To
the extent any other debt is secured, that other debt would be effectively
senior to the exchange notes.
Your ability to transfer the exchange notes may be limited by the absence
of a trading market.
The exchange notes will be new securities for which currently there is no
trading market. We do not currently intend to apply for listing of the
exchange notes on any securities exchange or stock market. The liquidity of
any market for the exchange notes will depend on the number of holders of
those exchange notes, the interest of securities dealers in making a market in
those exchange notes and other factors. Accordingly, we cannot assure you as
to the development or liquidity of any market for the exchange notes.
Historically, the market for noninvestment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of
securities similar to the exchange notes. We cannot assure you that the
market, if any, for the exchange notes will be free from similar disruptions.
Any market disruptions may adversely affect the holders of the exchange notes.
Fraudulent conveyance considerations may cause the exchange notes to be
voided or subordinated to all our other debts.
Under applicable provisions of United States federal bankruptcy law or
comparable provisions of state fraudulent transfer law, if, among other
things, we, at the time we incurred the indebtedness evidenced by the exchange
notes,
. (a) were or were rendered insolvent by reason of the incurrence of that
indebtedness, (b) were engaged in a business or transaction for which
the assets remaining with us constituted unreasonably small capital or
(c) intended to incur, or believed that we could incur, debts beyond our
ability to pay those debts as they mature; and
27
<PAGE>
. received less than reasonably equivalent value or fair consideration for
the incurrence of that indebtedness,
then the exchange notes and any pledge or other security interest securing that
indebtedness could be voided or claims in respect of the exchange notes could
be subordinated to all our other debts.
Similarly, under applicable provisions of the Companies Act 1981 of Bermuda,
if at any time within six months after we incurred the indebtedness evidenced
by the exchange notes, a winding up of us begins in circumstances in which the
issue of the exchange notes would be deemed to be a fraudulent preference
within the meaning of that Companies Act, then the exchange notes and any
pledge or other security interest securing that indebtedness could be voided or
claims in respect of the exchange notes could be subordinated to all our other
debts.
Similar provisions as outlined in the paragraphs above may also apply to our
parent company's obligation to guarantee the exchange notes. In addition, the
payment of interest and principal by us under the exchange notes or the payment
of amounts by our parent company under the guarantee of the exchange notes
could be voided and required to be returned to the person making those payments
or to a fund for the benefit of our creditors or the creditors of our parent
company.
The 2006 exchange notes will be treated as having been issued with original
issue discount.
The 2006 exchange notes will be treated as having been issued with original
issue discount for United States federal income tax purposes. Consequently, if
you hold these exchange notes, you generally will be required to include
amounts in gross income for United States federal income tax purposes in
advance of the receipt of cash attributable to that income. See "Certain Income
Tax Consequences--Taxation of Noteholders --United States Federal Income Tax
Considerations" on page 86 for a more detailed discussion of the United States
federal income tax consequences to you resulting from the purchase, ownership
and disposition of the exchange notes.
Risk Factors Relating to Our Business
We cannot assure you of the successful integration of newly acquired
businesses. We cannot assure you that the expected benefits will be
achieved.
Part of our growth strategy is to make selective strategic acquisitions of
businesses operated by others. Achieving the benefits of these acquisitions
will depend in part on the integration of those businesses with our business in
an efficient manner. We cannot assure you that this will happen or that it will
happen in a timely manner. The consolidation of operations following these
acquisitions will often require substantial attention from management. The
diversion of management attention and any difficulties encountered in the
transition and integration process could have a material adverse effect on the
revenue, levels of expenses and operating results of the combined company. We
cannot assure you that the combined company will realize any of the anticipated
benefits of any acquisition.
It may be difficult to evaluate Global Crossing Ltd.'s business because it
has a limited operating history.
Global Crossing Ltd. was organized in March 1997 and, with the exception of
its Frontier, Global Marine Systems and Racal Telecom subsidiaries, has a
limited operating history. Because of this limited history and its rapid growth
through successive acquisitions, it may be difficult for potential investors to
evaluate the performance of Global Crossing Ltd.'s operations. In particular,
comparisons of its results of operations from one period to another may not be
fully indicative of its current ability to conduct its business.
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We may encounter difficulties in completing our cable systems currently
under development.
Our ability to achieve our strategic objectives will depend in large part
upon the successful, timely and cost-effective completion of our cable systems
currently under development, as well as on achieving substantial capacity sales
on these systems once they become operational and on our other operational
systems. The construction of these systems will be affected by a variety of
factors, uncertainties and contingencies, many of which are beyond our control,
including:
. our ability to manage their construction effectively;
. our ability to obtain all construction and operating permits and
licenses;
. third-party contractors performing their obligations on schedule; and
. our ability to enter into favorable construction contracts with a
limited number of suppliers.
These factors may significantly delay or prevent completion of one or more
of our systems currently under development, which could have a material adverse
effect on our business, financial condition and results of operations.
We cannot assure you that each of these systems will be completed at the
cost and in the time frame currently estimated by us, or even at all. Although
we award contracts for construction of our systems to suppliers who in most
cases are expected to be bound by a fixed-price construction cost schedule and
to provide guarantees in respect of completion dates and system design
specifications, we cannot assure you that the actual construction costs or the
time required to complete these systems will not exceed our current estimates.
These circumstances could have a material adverse effect on our business,
financial condition and results of operations.
Our revenue growth plan depends on product and service expansion.
We intend to grow revenue and profits by:
. introducing new services and products;
. developing or acquiring additional cable systems; and
. upgrading capacity on our planned systems.
Our inability to effect these expansions of our products and services could
have a material adverse effect on our business, financial condition and results
of operations.
We face competition which may reduce demand for our products and services.
The international telecommunications industry is highly competitive. We
compete primarily on the basis of price, availability, service quality and
reliability, customer service and the location of our systems and services. The
ability of our competitors to provide comparable products and services at
similar prices could have a material adverse effect on demand for our products
and services. In addition, much of our planned growth is predicated upon the
growth in demand for international telecommunications capacity and services. We
cannot assure you that this anticipated demand growth will occur.
We are growing rapidly in a changing industry.
Our strategy is to be the premier provider of global broadband
telecommunication services for both wholesale and retail customers. As a result
of this aggressive strategy, we are experiencing rapid expansion and expect it
to continue for the foreseeable future. This growth has increased our operating
complexity. At the same time, the international telecommunications industry is
changing rapidly due to, among other things:
. the easing of regulatory constraints;
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<PAGE>
. the privatization of established carriers;
. the expansion of telecommunications infrastructure;
. the growth in demand for bandwidth caused by expansion of Internet and
data transmissions;
. the globalization of the world's economies; and
. the changing technology for wired, wireless and satellite communication.
We cannot assure you that we will succeed in adapting to the rapid changes
in the international telecommunications industry.
We may have difficulty in obtaining the additional financing required to
develop our business.
In order to further implement our aggressive growth strategy, we anticipate
that we will require substantial additional equity and debt financing. Under
our business plan, we and our affiliates expect to require significant
financing by the end of 2000 to build out the Global Crossing network and
provide additional services to our customers. Obtaining additional financing
will be subject to a number of factors, including:
. the state of operations of our company;
. our actual or anticipated results of operations, financial condition and
cash flows;
. investor sentiment towards companies with substantial international
operations; and
. generally prevailing market conditions.
If additional funds are raised through the issuance of equity securities,
the percentage ownership of our then current shareholders will be reduced, and
the new equity securities may have rights, preferences or privileges senior to
those of the holders of our common stock. If additional funds are raised
through the issuance of debt securities, these securities would have some
rights, preferences and privileges senior to those of the holders of our common
stock, and the terms of this debt could impose restrictions on our operations
and result in significant interest expense to us. In the event that we are
unable to raise sufficient financing on satisfactory terms and conditions in
the future, our company would be adversely affected.
We face price declines that could adversely affect our business.
Advances in fiber optic technology have resulted in significant per circuit
price declines in the fiber optic cable transmission industry. Recent changes
in technology caused prices for telecommunications capacity and services to go
down even further. If there is less demand than we project or a bigger drop in
prices than we project, there could be a material adverse effect on our
business, financial condition and results of operations. We cannot assure you,
even if our projections with respect to those factors are realized, that we
will be able to implement our strategy or that our strategy will be successful
in the rapidly evolving telecommunications market.
We confront several system risks that could affect our operations.
Each of our systems is and will be subject to the risks inherent in a large-
scale, complex fiber optic telecommunications system. The operation,
administration, maintenance and repair of our systems requires the coordination
and integration of sophisticated and highly specialized hardware and software
technologies and equipment located throughout the world. We cannot assure you
that our systems will continue to function as expected in a cost-effective
manner. The failure of the hardware or software to function as required could
render a cable system unable to perform at design specifications.
Each of our undersea systems either has or is expected to have a design life
of generally 25 years, while each of our terrestrial systems either has or is
expected to have a design life of at least 20 years. The economic
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<PAGE>
lives of these systems, however, are expected to be shorter than their design
lives, and we cannot assure you of the actual useful life of any of these
systems. A number of factors will ultimately affect the useful life of each of
our systems, including:
. quality of construction;
. unexpected damage or deterioration; and
. technological or economic obsolescence.
Failure of any of our systems to operate for its full design life could have
a material adverse effect on our business, financial condition and results of
operations.
Our success depends on our ability to maintain, hire and successfully
integrate key personnel.
Our future success depends on the skills, experience and efforts of our
officers and key technical and sales employees. In particular, our senior
management has significant experience in the telecommunications and Internet
industries, and the loss of any of them could negatively affect our ability to
execute our business strategy. In addition, we cannot assure you that we will
be able to integrate new management into our existing operations. Competition
for these individuals is intense, and we may not be able to attract, motivate
and retain highly skilled qualified personnel. We do not have "key person" life
insurance policies covering any of our employees.
We face risks associated with international operations.
Because we will derive substantial revenue from international operations and
intend to have substantial physical assets in several jurisdictions along our
routes, our business is subject to risks inherent in international operations,
including:
. political and economic conditions;
. unexpected changes in regulatory environments;
. exposure to different legal standards; and
. difficulties in staffing and managing operations.
We have not experienced any material adverse effects with respect to our
foreign operations arising from these factors. However, problems associated
with these risks could arise in the future. Finally, managing operations in
multiple jurisdictions may place further strain on our ability to manage our
overall growth.
Because many of our customers deal predominantly in foreign currencies, we
may be exposed to exchange rate risks and our net income may suffer due to
currency translations.
We primarily invoice for our services in United States dollars; however,
most of our customers and many of our prospective customers derive their
revenue in currencies other than United States dollars. The obligations of
customers with substantial revenue in foreign currencies may be subject to
unpredictable and indeterminate increases in the event that such currencies
devalue relative to the United States dollar. Furthermore, such customers may
become subject to exchange control regulations restricting the conversion of
their revenue currencies into United States dollars. In such event, the
affected customers may not be able to pay us in United States dollars. In
addition, where we invoice for our services in currencies other than United
States dollars, our net income may suffer due to currency translations in the
event that such currencies devalue relative to the United States dollar and we
do not elect to enter into currency hedging arrangements in respect of those
payment obligations.
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Our operations are subject to regulation in the United States and abroad
and require us to obtain and maintain a number of governmental licenses and
permits. If we fail to comply with those regulatory requirements or obtain
and maintain those licenses and permits, we may not be able to conduct our
business.
In the United States, our intrastate, interstate, and international
telecommunications networks and services are subject to regulation at the
federal, state, and local levels. We also have facilities and provide services
in numerous countries in Europe, Latin America, and Asia. Our operations in
those countries are subject to regulation at the national level and, in some
cases, at the state, provincial, and local levels.
. Our interstate and international operations in the United States are
governed by the Communications Act of 1934, as amended by the
Telecommunications Act of 1996. There are several ongoing proceedings at
the FCC and in the federal courts regarding the implementation of
various aspects of the Telecommunications Act. The outcomes of these
proceedings may affect the manner in which we are permitted to provide
our services in the United States and may have a material adverse effect
on our operations.
. The intrastate activities of our local telephone service companies are
regulated by the states in which they do business. A number of states in
which we operate are conducting proceedings related to the provision of
services in a competitive telecommunications environment. These
proceedings may affect the manner in which we are permitted to provide
our services in one or more states and may have a material adverse
effect on our operations.
. Our operations outside the United States are governed by the laws of the
countries in which we operate. The regulation of telecommunications
networks and services outside the United States varies widely. In some
countries, the range of services that we are legally permitted to
provide may be limited. In other countries, existing telecommunications
legislation is in the process of development, is unclear or
inconsistent, or is applied in an unequal or discriminatory fashion. Our
inability or failure to comply with the telecommunications laws and
regulations of one or more of the countries in which we operate could
result in the temporary or permanent suspension of operations in one or
more countries. We also may be prohibited from entering certain
countries at all or from providing all of our services in one or more
countries. In addition, many of the countries in which we operate are
conducting proceedings that will affect the implementation of their
telecommunications legislation. We cannot be certain of the outcome of
these proceedings. These proceedings may affect the manner in which we
are permitted to provide our services in these countries and may have a
material adverse effect on our operations.
. In the ordinary course of constructing our networks and providing our
services we are required to obtain and maintain a variety of
telecommunications and other licenses and authorizations in the
countries in which we operate. We also must comply with a variety of
regulatory obligations. Our failure to obtain or maintain necessary
licenses and authorizations, or to comply with the obligations imposed
upon license-holders in one or more countries, may result in sanctions,
including the revocation of authority to provide services in one or more
countries.
We depend on third parties for many functions. If the services of those
third parties are not available to us, we may not be able to conduct our
business.
We depend and will continue to depend upon third parties to:
. construct some of our systems and provide equipment and maintenance;
. provide access to a number of origination and termination points of our
systems in various jurisdictions;
. construct and operate landing stations in a number of those
jurisdictions;
. acquire rights of way;
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. provide terrestrial capacity to our customers through contractual
arrangements; and
. act as joint venture participants with regard to some of our current and
potential future systems.
We cannot assure you that third parties will perform their contractual
obligations or that they will not be subject to political or economic events
which may have a material adverse effect on our business, financial condition
and results of operations. If they fail to perform their obligations, we may
not be able to conduct our business. If any of our joint venture participants
experiences a change in strategic direction such that their strategy regarding
our mutual joint venture diverges from our own, we may not be able to realize
the benefits anticipated to be derived from the joint venture.
We have substantial leverage which may limit our ability to comply with the
terms of our indebtedness and may restrict our ability to operate.
Our significant indebtedness could adversely affect us by leaving us with
insufficient cash to fund operations and impairing our ability to obtain
additional financing. The amount of our debt could have important consequences
for our future, including, among other things:
. cash from operations may be insufficient to meet the principal and
interest on our indebtedness as it becomes due;
. payments of principal and interest on borrowings may leave us with
insufficient cash resources for our operations; and
. restrictive debt covenants may impair our ability to obtain additional
financing.
We have incurred a high level of debt. As of December 31, 1999, we and our
consolidated subsidiaries had a total of $8,051 million of total liabilities,
including approximately $5,056 million in senior indebtedness, of which $1,295
million was secured. As of that date, we additionally had outstanding
cumulative convertible preferred stock with a face value of $1,650 million.
Our subsidiary, Global Crossing Holdings, also has mandatorily redeemable
preferred stock outstanding with a face value of $500 million. In addition,
our Pacific Crossing joint venture entered into an $850 million non-recourse
credit facility, under which it had incurred $750 million of indebtedness as
of December 31, 1999.
Our ability to repay our debt depends upon a number of factors, many of
which are beyond our control. In addition, we rely on dividends, loan
repayments and other intercompany cash flows from our subsidiaries to repay
our obligations. Our operating subsidiaries have entered into a senior secured
corporate credit facility. Accordingly, the payment of dividends from these
operating subsidiaries and the making and repayments of loans and advances are
subject to statutory, contractual and other restrictions.
In addition, if we are unable to generate sufficient cash flow to meet our
debt service requirements, we may have to renegotiate the terms of our long-
term debt. We cannot assure you that we would be able to renegotiate
successfully those terms or refinance our indebtedness when required or that
satisfactory terms of any refinancing would be available. If we were not able
to refinance our indebtedness or obtain new financing under these
circumstances, we would have to consider other options, such as:
. sales of some assets;
. sales of equity;
. negotiations with our lenders to restructure applicable indebtedness; or
. other options available to us under applicable law.
Global Crossing Ltd.'s principal shareholders may be able to influence
materially the outcome of shareholder votes.
As of April 14, 2000, Pacific Capital Group and its affiliates had a 11.1%
beneficial ownership interest in Global Crossing Ltd. Global Crossing Ltd. has
entered into various transactions with Pacific Capital Group and
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<PAGE>
its affiliates and assumed the on-going development of some of its systems
from an affiliate of Pacific Capital Group. Mr. Gary Winnick, chairman of
Global Crossing Ltd.'s board of directors, controls Pacific Capital Group and
its subsidiaries. In addition, several of Global Crossing Ltd.'s other
officers and directors are affiliated with Pacific Capital Group. Furthermore,
as of April 14, 2000, Canadian Imperial Bank of Commerce and its affiliates
had a 8.70% beneficial ownership interest in Global Crossing Ltd. Canadian
Imperial Bank of Commerce and its affiliates have acted as underwriter, lender
or initial purchaser in several of Global Crossing Ltd.'s financial
transactions in connection with the development and construction of its
systems. Several members of Global Crossing Ltd.'s board of directors are
employees of an affiliate of Canadian Imperial Bank of Commerce.
As of April 14, 2000, Pacific Capital Group and Canadian Imperial Bank of
Commerce collectively beneficially owned 19.8% of the outstanding shares of
Global Crossing Ltd.'s common stock. Accordingly, Pacific Capital Group and
Canadian Imperial Bank of Commerce may be able to influence materially the
outcome of matters submitted to a vote of Global Crossing Ltd.'s shareholders,
including the election of directors.
Officers and directors own a substantial portion of Global Crossing Ltd.
and may have conflicts of interest.
Global Crossing Ltd.'s executive officers and directors have substantial
equity interests in Global Crossing Ltd. As of April 14, 2000, all of Global
Crossing Ltd.'s directors and executive officers as a group collectively
beneficially owned 21.6% of Global Crossing Ltd.'s outstanding common stock,
including shares beneficially owned by Pacific Capital Group and certain
shares beneficially owned by Canadian Imperial Bank of Commerce. Some of these
individuals have also received amounts from Global Crossing Ltd. due to
advisory services fees paid to Pacific Capital Group and its affiliates.
Some of Global Crossing Ltd.'s directors and executive officers also serve
as officers and directors of other companies. Additionally, some of Global
Crossing Ltd.'s officers and directors are active investors in the
telecommunications industry. Service as one of Global Crossing Ltd.'s
directors or officers and as a director or officer of another company could
create conflicts of interest when the director or officer is faced with
decisions that could have different implications for Global Crossing Ltd. and
the other company. A conflict of interest could also exist with respect to
allocation of time and attention of persons who are Global Crossing Ltd.'s
directors or officers and directors and officers of another company. The
pursuit of these other business interests could distract these officers from
pursuing opportunities on Global Crossing Ltd.'s behalf. These conflicts of
interest could have a material adverse effect on Global Crossing Ltd.'s
business, financial condition and results of operations.
We cannot predict our future tax liabilities.
We believe that a significant portion of the income derived from our
undersea systems will not be subject to tax by any of (1) Bermuda, which
currently does not have a corporate income tax, or (2) some other countries in
which we conduct activities or in which our customers are located. However, we
base this belief upon:
. the anticipated nature and conduct of our business, which may change;
and
. our understanding of our position under the tax laws of the various
countries in which we have assets or conduct activities, which position
is subject to review and possible challenge by taxing authorities and to
possible changes in law, which may have retroactive effect.
We cannot predict the amount of tax to which we may become subject and
cannot be certain that any of these factors would not have a material adverse
effect on our business, financial condition and results of operations.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
We have included or incorporated by reference in this prospectus forward-
looking statements that state our own or our management's intentions, beliefs,
expectations or predictions for the future. Forward-looking statements are
subject to a number of risks, assumptions and uncertainties which could cause
our actual results to differ materially from those projected in the forward-
looking statements. These risks, assumptions and uncertainties include:
. the ability to complete systems within the currently estimated time
frames and budgets;
. the ability to compete effectively in a rapidly evolving and price
competitive marketplace;
. changes in the nature of telecommunications regulation in the United
States and other countries;
. changes in business strategy;
. the successful integration of newly acquired businesses;
. the impact of technological change; and
. other risks referenced from time to time in our filings with the SEC.
USE OF PROCEEDS
We will not receive any proceeds from the exchange offer.
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RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
The following table presents Global Crossing Ltd.'s historical ratios of
earnings to fixed charges and preferred dividends for the periods indicated:
<TABLE>
<CAPTION>
Period From
Year Ended Year Ended March 19, 1997
December 31, December 31, (Date of Inception)
1999 1998 to December 31, 1997
------------ ------------ --------------------
<S> <C> <C> <C>
Ratio...................... -- -- --
Deficiency................. $(49,607) $(95,371) $(12,850)
</TABLE>
For the purposes of this computation, earnings are defined as income (loss)
before income taxes plus fixed charges and preferred dividends. Fixed charges
consist of interest expense, including amortization of deferred debt issuance
costs and the interest portion of capital lease obligations, and the portion of
rental expense that is representative of the interest factor, deemed to be one-
third of minimum operating lease rentals.
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THE EXCHANGE OFFER
Background of the Exchange Offer
Our parent, Global Crossing Ltd., and we have entered into a registration
rights agreement with the initial purchasers of the outstanding notes. In that
agreement we agreed, under specified circumstances, to file a registration
statement relating to an offer to exchange the outstanding notes for exchange
notes. We also agreed to use our reasonable best efforts to cause the offer to
be consummated within 180 days following the original issue of the outstanding
notes on November 19, 1999. The exchange notes will have terms substantially
identical to the outstanding notes, except that the exchange notes will not
contain terms with respect to transfer restrictions, registration rights and
liquidated damages for failure to observe certain obligations in the
registration rights agreement.
In addition, in the registration rights agreement we agreed that, under the
circumstances outlined below, we will use our reasonable best efforts to cause
the SEC to declare effective a shelf registration statement with respect to the
resale of the outstanding notes and keep the shelf registration statement
effective for up to two years after its effective date. These circumstances
include:
. if applicable law, SEC rules or regulations or any interpretations of
those rules or regulations by the staff of the SEC do not permit us to
effect the exchange offer as contemplated by the registration rights
agreement;
. if any holder of the outstanding notes notifies us within 20 business
days following the consummation of the exchange offer that (1) that
holder is prohibited by law or SEC policy from participating in the
exchange offer or (2) that holder may not resell the exchange notes it
acquires in the exchange offer to the public without delivering a
prospectus and that this prospectus is not appropriate or available for
resales by that holder; or
. that holder is a broker-dealer and holds outstanding notes acquired
directly from us or any of our affiliates.
If we fail to comply with certain obligations under the registration rights
agreement, we will be required to pay special interest to holders of the
outstanding notes. Please read the section captioned "Description of the
Exchange Notes--Exchange Offer; Registration Rights" on page 82 for more
details regarding the registration rights agreement.
Resale of Exchange Notes
Based on interpretations of the SEC staff outlined in no action letters
issued to unrelated third parties, we believe that you may offer to resell,
resell or otherwise transfer exchange notes issued in the exchange offer in
exchange for outstanding notes without compliance with the registration and
prospectus delivery provisions of the Securities Act, if:
. you are not an affiliate of ours within the meaning of Rule 405 under
the Securities Act;
. you acquire the exchange notes in the ordinary course of your business;
and
. you do not intend to participate in the distribution of the exchange
notes.
If you tender outstanding notes in the exchange offer with the intention of
participating in any manner in a distribution of the exchange notes, you:
. cannot rely on the position of the staff of the SEC enunciated in "Exxon
Capital Holdings Corporation" or similar interpretive letters; and
. must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with a secondary resale transaction.
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You may use this prospectus for an offer to resell, for the resale or for
other transfer of exchange notes only as specifically provided in this
prospectus. With regard to broker-dealers, only broker-dealers that acquired
the outstanding notes as a result of market-making activities or other trading
activities may participate in the exchange offer. Each broker-dealer that
receives exchange notes for its own account in exchange for outstanding notes
that the broker-dealer acquired as a result of market-making activities or
other trading activities must acknowledge that it will deliver a prospectus in
connection with any resale of the exchange notes. Please read the section
captioned "Plan of Distribution" on page 90 for more details regarding the
transfer of exchange notes.
Terms of the Exchange Offer
If you wish to exchange outstanding notes for exchange notes in the exchange
offer, you will be required to make the following representations:
. any exchange notes will be acquired in the ordinary course of your
business;
. you have no arrangement with any person to participate in the
distribution of the exchange notes; and
. you are not an affiliate of ours within the meaning of Rule 405 of the
Securities Act or, if you are an affiliate, you will comply with
applicable registration and prospectus delivery requirements of the
Securities Act.
On the terms and subject to the conditions contained in this prospectus and
in the letter of transmittal, we will accept for exchange any outstanding notes
properly tendered and not withdrawn before the expiration date. We will issue
$1,000 principal amount of exchange notes in exchange for each $1,000 principal
amount of outstanding notes you surrender in the exchange offer. You may tender
outstanding notes only in integral multiples of $1,000.
The form and terms of the exchange notes will be substantially identical to
the form and terms of the outstanding notes, except that the exchange notes
will be registered under the Securities Act, will not bear legends restricting
their transfer and will not provide for any special interest if we fail to
fulfill our obligations under the registration rights agreement to file, and
cause to be effective, a registration statement. The exchange notes will
evidence the same debt as the outstanding notes. We will issue the exchange
notes under the same indenture that authorized the issuance of the outstanding
notes, and the exchange notes will be entitled to the benefits of that
indenture. Consequently, the outstanding notes and the exchange notes with
substantially identical terms will be treated as a single class of debt
securities under that indenture. For a description of the indenture, see
"Description of the Exchange Notes" on page 47.
The exchange offer is not conditioned upon any minimum aggregate principal
amount of outstanding notes being tendered for exchange.
As of the date of this prospectus, $900,000,000 aggregate principal amount
of the outstanding notes due 2006 are outstanding and $1,100,000,000 aggregate
principal amount of the outstanding notes due 2009 are outstanding. This
prospectus and the letter of transmittal are being sent to all registered
holders of outstanding notes. There will be no fixed record date for
determining registered holders of outstanding notes entitled to participate in
the exchange offer.
We intend to conduct the exchange offer in accordance with the provisions of
the registration rights agreement, the applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations of the SEC.
Outstanding notes that are not tendered for exchange in the exchange offer will
remain outstanding and continue to accrue interest and will be entitled to the
rights and benefits their holders have under the indenture relating to the
outstanding notes.
We will be deemed to have accepted for exchange properly tendered
outstanding notes when we have given oral or written notice of the acceptance
to the exchange agent. The exchange agent will act as agent for the tendering
holders for the purposes of receiving the exchange notes from us and delivering
exchange notes to
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those holders. Subject to the terms of the registration rights agreement, we
expressly reserve the right to amend or terminate the exchange offer, and not
to accept for exchange any outstanding notes not previously accepted for
exchange, upon the occurrence of any of the conditions specified below under
the caption "--Certain Conditions to the Exchange Offer".
Holders who tender outstanding notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions
in the letter of transmittal, transfer taxes with respect to the exchange of
outstanding notes. We will pay all charges and expenses, other than some
applicable taxes described below, in connection with the exchange offer. It is
important that you read the section labeled "--Fees and Expenses" on page 44
for more details regarding fees and expenses incurred in the exchange offer.
Expiration Date; Extensions; Amendments
The exchange offer will expire at 5:00 p.m., New York City time on May 17,
2000, unless we, in our sole discretion, extend it.
In order to extend the exchange offer, we will notify the exchange agent
orally or in writing of any extension. We will notify the registered holders of
outstanding notes of the extension no later than 9:00 a.m., New York City time,
on the business day immediately after the previously scheduled expiration date.
We reserve the right, in our sole discretion:
. to delay accepting for exchange any outstanding notes;
. to extend the exchange offer or to terminate the exchange offer and to
refuse to accept outstanding notes not previously accepted if any of the
conditions outlined below under "--Certain Conditions to the Exchange
Offer" have not been satisfied, by giving oral or written notice of the
delay, extension or termination to the exchange agent; or
. subject to the terms of the registration rights agreement, to amend the
terms of the exchange offer in any manner.
We will follow any delay in acceptance, extension, termination or amendment
of the exchange offer as promptly as practicable by oral or written notice to
the registered holders of outstanding notes. If we amend the exchange offer in
a manner that we determine to constitute a material change, we will promptly
disclose that amendment in a manner reasonably calculated to inform the holders
of outstanding notes of that amendment.
Without limiting the manner in which we may choose to make public
announcements of any delay in acceptance, extension, termination or amendment
of the exchange offer, we will have no obligation to publish, advertise or
otherwise communicate any such public announcement, other than by making a
timely release to a financial news service.
During any extensions, all outstanding notes previously tendered will remain
subject to the exchange offer, and we may accept them for exchange. We will
return any outstanding notes that we do not accept for exchange for any reason
without expense to their tendering holder as promptly as practicable after the
expiration or termination of the exchange offer.
Certain Conditions to the Exchange Offer
Despite any other term of the exchange offer, we will not be required to
accept for exchange, or exchange any exchange notes for, any outstanding notes,
and we may terminate the exchange offer as provided in this prospectus before
accepting any outstanding notes for exchange if, in our reasonable judgment:
. the exchange notes to be received will not be tradable by the holder
without restriction under the Securities Act, the Exchange Act and
without material restrictions under the blue sky or securities laws of
substantially all of the states of the United States;
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<PAGE>
. the exchange offer, or the making of any exchange by a holder of
outstanding notes, would violate applicable law or any applicable
interpretation of the staff of the SEC; or
. any action or proceeding has been instituted or threatened in any court
or by or before any governmental agency with respect to the exchange
offer that, in our judgment, would reasonably be expected to impair our
ability to proceed with the exchange offer.
In addition, we will not be obligated to accept for exchange the outstanding
notes of any holder that has not made to us:
. the representations described in the first paragraph under "--Terms of
the Exchange Offer" on page 38 and "--Procedures for Tendering" below;
and
. other representations as may be reasonably necessary under applicable
SEC rules, regulations or interpretations to make available to that
holder an appropriate form for registration of the exchange notes under
the Securities Act.
These conditions are for our sole benefit, and we may assert them regardless
of the circumstances that may give rise to them or waive them in whole or in
part at any or at various times in our sole discretion. If we fail at any time
to exercise any of the foregoing rights, this failure will not constitute a
waiver of any of those rights. Each of those rights will be deemed an ongoing
right that we may assert at any time or at various times.
In addition, we will not accept for exchange any outstanding notes tendered,
and will not issue exchange notes in exchange for any outstanding notes that
have been tendered, if at that time any stop order will be threatened or in
effect with respect to the registration statement of which this prospectus
constitutes a part or the qualification of the indenture under the Trust
Indenture Act of 1939.
Procedures for Tendering
Only a holder of outstanding notes may tender outstanding notes in the
exchange offer. To tender in the exchange offer, you must:
. complete, sign and date the letter of transmittal, or a facsimile of the
letter of transmittal; have the signature on the letter of transmittal
guaranteed if the letter of transmittal so requires; and mail or deliver
the letter of transmittal or facsimile to the exchange agent before the
expiration date; or
. comply with the DTC's Automated Tender Offer Program procedures
described below.
In addition:
. the exchange agent must receive your outstanding notes along with the
letter of transmittal; or
. the exchange agent must receive, before the expiration date, a timely
confirmation of book-entry transfer of your outstanding notes into the
exchange agent's account at the DTC according to the procedures for
book-entry transfer described below or a properly transmitted agent's
message; or
. you must comply with the guaranteed delivery procedures described on
page 43.
The exchange agent must receive physical delivery of your letter of
transmittal and other required documents at the address indicated under "--
Exchange Agent" on page 44 before the expiration date.
Your tender that is not withdrawn before the expiration date will constitute
an agreement between you and us in accordance with the terms and subject to the
conditions specified in this prospectus and in the letter of transmittal.
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The method of delivery of outstanding notes, the letter of transmittal and
all other documents required by the exchange agent are at your election and
risk. Rather than mail these items, we recommend that you use an overnight or
hand delivery service. In all cases, you should allow sufficient time to assure
delivery to the exchange agent before the expiration date. You should not send
the letter of transmittal or outstanding notes to us. You may request your
broker, dealer, commercial bank, trust company or other nominee to effect the
above transactions for you.
If you are a beneficial owner whose outstanding notes are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
wish to tender, you should contact the registered holder promptly and instruct
it to tender on your behalf. If you wish to tender on your own behalf, you
must, before completing and executing the letter of transmittal and delivering
your outstanding notes, either:
. make appropriate arrangements to register ownership of the outstanding
notes in your name; or
. obtain a properly completed bond power from the registered holder of the
outstanding notes.
The transfer of registered ownership may take considerable time and may not
be completed before the expiration date.
A member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc., a commercial bank or trust
company having an office or correspondent in the United States or another
"eligible institution" within the meaning of Rule 17Ad-15 under the Exchange
Act must guarantee signatures on a letter of transmittal or a notice of
withdrawal described below, unless the outstanding notes are tendered:
. by a registered holder who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the letter
of transmittal; or
. for the account of an eligible institution.
If the letter of transmittal is signed by a person other than the registered
holder of any outstanding notes listed on the outstanding notes, the
outstanding notes must be endorsed or accompanied by a properly completed bond
power. The bond power must be signed by the registered holder as the registered
holder's name appears on the outstanding notes and an eligible institution must
guarantee the signature on the bond power.
If the letter of transmittal or any outstanding notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, those persons should so indicate when signing. Unless we waive this
condition, those persons should also submit evidence satisfactory to us of
their authority to deliver the letter of transmittal.
The exchange agent and the DTC have confirmed that any financial institution
that is a participant in the DTC's system may use the DTC's Automated Tender
Offer Program to tender. Participants in the program may, instead of physically
completing and signing the letter of transmittal and delivering it to the
exchange agent, transmit their acceptance of the exchange offer electronically.
They may do so by causing the DTC to transfer the outstanding notes to the
exchange agent in accordance with its procedures for transfer. The DTC will
then send an agent's message to the exchange agent. The term "agent's message"
means a message transmitted by the DTC, received by the exchange agent and
forming part of the book-entry confirmation, to the effect that:
. the DTC has received an express acknowledgment from a participant in its
Automated Tender Offer Program that is tendering outstanding notes that
are the subject of the book-entry confirmation;
41
<PAGE>
. the participant has received and agrees to be bound by the terms of the
letter of transmittal or, in the case of an agent's message relating to
guaranteed delivery, that the participant has received and agrees to be
bound by the applicable notice of guaranteed delivery; and
. the agreement may be enforced against the participant.
We will determine in our sole discretion all questions as to the validity,
form, eligibility, including time of receipt, acceptance of tendered
outstanding notes and withdrawal of tendered outstanding notes. Our
determination will be final and binding. We reserve the absolute right to
reject any outstanding notes not properly tendered or any outstanding notes the
acceptance of which would, in the opinion of our counsel, be unlawful. We also
reserve the right to waive any defects, irregularities or conditions of tender
as to particular outstanding notes. Our interpretation of the terms and
conditions of the exchange offer, including the instructions in the letter of
transmittal, will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of outstanding notes must
be cured within the time that we will determine. Although we intend to notify
you of defects or irregularities with respect to tenders of outstanding notes,
neither we, the exchange agent nor any other person will incur any liability
for failure to give notification. Tenders of outstanding notes will not be
deemed made until any defects or irregularities have been cured or waived.
Any outstanding notes that have been tendered for exchange but that are not
exchanged for any reason will be returned to their holder without cost to the
holder or, in the case of outstanding notes tendered by book-entry transfer
into the exchange agent's account at the DTC according to the procedures
described above, the outstanding notes will be credited to an account
maintained with the DTC for outstanding notes as soon as practicable after
withdrawal, rejection of tender or termination of the exchange offer. Properly
withdrawn outstanding notes may be retendered by following one of the
procedures described under "--Procedures for Tendering" on page 40 at any time
on or before the expiration date.
By signing the letter of transmittal, you, as a tendering holder of
outstanding notes, will represent to us that, among other things:
. any exchange notes that you receive will be acquired in the ordinary
course of your business;
. you have no arrangement or understanding with any person or entity to
participate in the distribution of the exchange notes;
. if you are not a broker-dealer, that you are not engaged in and do not
intend to engage in the distribution of the exchange notes;
. if you are a broker-dealer that will receive exchange notes for your own
account in exchange for outstanding notes that were acquired as a result
of market-making or other trading activities, that you will deliver a
prospectus, as required by law, in connection with any resale of those
exchange notes; and
. you are not an "affiliate" of ours within the meaning of Rule 405 of the
Securities Act or, if you are an affiliate, you will comply with any
applicable registration and prospectus delivery requirements of the
Securities Act.
Book-Entry Transfer
The exchange agent will make a request to establish an account with respect
to the outstanding notes at the DTC for purposes of the exchange offer promptly
after the date of this prospectus; and any financial institution participating
in the DTC's system may make book-entry delivery of outstanding notes by
causing the DTC to transfer the outstanding notes into the exchange agent's
account at the DTC in accordance with the DTC's procedures for transfer.
Holders of outstanding notes who are unable to deliver confirmation of the
book-entry
42
<PAGE>
tender of their outstanding notes into the exchange agent's account at the DTC
or all other documents required by the letter of transmittal to the exchange
agent on or before the expiration date must tender their outstanding notes
according to the guaranteed delivery procedures described below.
Guaranteed Delivery Procedures
If you wish to tender your outstanding notes, but your outstanding notes are
not immediately available or you cannot deliver your outstanding notes, the
letter of transmittal or any other required documents to the exchange agent or
comply with the applicable procedures under the DTC's Automated Tender Offer
Program before the expiration date, you may tender if:
. you make the tender through an eligible institution;
. before the expiration date, the exchange agent receives from the
eligible institution either a properly completed and duly executed
notice of guaranteed delivery, by facsimile transmission, mail or hand
delivery, or a properly transmitted agent's message and notice of
guaranteed delivery:
. indicating your name and address, the registered number(s) of the
outstanding notes and the principal amount of outstanding notes
tendered:
. stating that the tender is being made by those documents; and
. guaranteeing that, within three New York Stock Exchange trading days
after the expiration date, the letter of transmittal or facsimile of
that letter together with the outstanding notes or a book-entry
confirmation and any other documents required by the letter of
transmittal will be deposited by the eligible institution with the
exchange agent; and
. the exchange agent receives the properly completed and executed letter
of transmittal or facsimile of that letter as well as all tendered
outstanding notes in proper form for transfer or a book-entry
confirmation, and all other documents required by the letter of
transmittal, within three New York Stock Exchange trading days after the
expiration date.
Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to holders who wish to tender their outstanding notes according to the
guaranteed delivery procedures outlined above.
Withdrawal of Tenders
Except as otherwise provided in this prospectus, you may withdraw your
tender of outstanding notes at any time before the expiration date.
For a withdrawal to be effective:
. the exchange agent must receive a written note -- which may be by
telegram, telex, facsimile transmission or letter -- of withdrawal at
one of the addresses indicated under "--Exchange Agent" on page 44; or
. you must comply with the appropriate procedures of the DTC's Automated
Tender Offer Program system.
Any notice of withdrawal must:
. specify the name of the person who tendered the outstanding notes to be
withdrawn;
. identify the outstanding notes to be withdrawn, including the principal
amount of the outstanding notes; and
. where certificates for outstanding notes have been transmitted, specify
the name in which the outstanding notes were registered, if different
from that of the withdrawing holder.
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<PAGE>
If certificates for outstanding notes have been delivered or otherwise
identified to the exchange agent, then, before the release of those
certificates, the withdrawing holder must also submit;
. the serial numbers of the particular certificates to be withdrawn; and
. a signed notice of withdrawal with signatures guaranteed by an eligible
institution unless the holder is an eligible institution.
If you have tendered outstanding notes under the procedure for book-entry
transfer described above, any notice of withdrawal must specify the name and
number of the account at the DTC to be credited with the withdrawn outstanding
notes and otherwise comply with the procedures of that facility. We will
determine all questions as to the validity, form and eligibility, including
time of receipt, of notices, and our determination will be final and binding on
all parties. We will deem any outstanding notes so withdrawn not to have been
validly tendered for exchange for purposes of the exchange offer.
Exchange Agent
We have appointed United States Trust Company of New York as exchange agent
for the exchange offer. You should direct questions and requests for
assistance, requests for additional copies of this prospectus or of the letter
of transmittal and requests for the notice of guaranteed delivery to the
exchange agent addressed as follows:
For delivery by registered/certified For delivery by hand before 4:30
mail: p.m.:
United States Trust Company of New
York United States Trust Company of
P.O. Box 843 Cooper Station New York
New York, NY 10276 111 Broadway
Attn: Corporate Trust Services New York, NY 10006
For delivery by overnight courier/ Attn: Lower Level Corporate
Trust Window
By facsimile transmission
by hand after 4:30 p.m. on the (for eligible institutions
expiration date: only):
(212) 420-6211
United States Trust Company of New Attn: Customer Service
York Facsimile confirmation: (800)
770 Broadway, 13th Floor 548-6565
New York, NY 10003
Attn: Corporate Trust Operations
Delivery of the letter of transmittal to an address other than as provided
above or transmission via facsimile other than as provided above does not
constitute a valid delivery of the letter of transmittal.
Fees and Expenses
We will bear the expenses of soliciting tenders. The principal solicitation
is being made by mail; however, we may make additional solicitations by
telegraph, telephone or in person by our officers and regular employees and
those of our affiliates.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to broker-dealers or others soliciting
acceptances of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and reimburse it for its related
reasonable out-of-pocket expenses.
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<PAGE>
We will pay the cash expenses to be incurred in connection with the exchange
offer. The expenses are estimated in the aggregate to be approximately
$1,500,000. They include:
. SEC registration fees;
. fees and expenses of the exchange agent and trustee;
. accounting and legal fees and printing costs; and
. related fees and expenses.
Transfer Taxes
We will pay all transfer taxes, if any, applicable to the exchange of
outstanding notes under the exchange offer. You, as the tendering holder,
however, will be required to pay any transfer taxes, whether imposed on the
registered holder or any other person, if:
. certificates representing outstanding notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of
outstanding notes tendered;
. tendered outstanding notes are registered in the name of any person
other than the person signing the letter of transmittal; or
. a transfer tax is imposed for any reason other than the exchange of
outstanding notes under the exchange offer.
If you do not submit satisfactory evidence of payment of those taxes with
the letter of transmittal, the amount of those transfer taxes will be billed to
the tendering holder.
Holders who tender their outstanding notes for exchange will not be required
to pay any transfer taxes. However, holders who instruct us to register
exchange notes in the name of, or request that outstanding notes not tendered
or not accepted in the exchange offer be returned to, a person other than the
registered tendering holder will be required to pay any applicable transfer
tax.
Some Adverse Consequences of Failure to Exchange
If you fail to exchange your outstanding notes for exchange notes under the
exchange offer, you will remain subject to the restrictions on transfer of your
outstanding notes. In general, you may not offer or sell the outstanding notes
unless they are registered under the Securities Act, or if the offer or sale is
exempt from registration under the Securities Act and applicable state
securities laws. Except as required by the registration rights agreement, we do
not intend to register resales of the outstanding notes under the Securities
Act. Based on interpretations of the SEC staff, exchange notes issued in the
exchange offer may be offered for resale, resold or otherwise transferred by
their holders, other than any holder that is our "affiliate" within the meaning
of Rule 405 under the Securities Act, without compliance with the registration
and prospectus delivery provisions of the Securities Act, so long as the
holders acquired the exchange notes in the ordinary course of the holders'
business and the holders have no arrangement or understanding with respect to
the distribution of the exchange notes to be acquired in the exchange offer.
Any holder who tenders in the exchange offer for the purpose of participating
in a distribution of the exchange notes:
. could not rely on the applicable interpretations of the SEC; and
. must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with a secondary resale transaction.
The amount of outstanding notes after the exchange offer is complete will be
reduced by the amount of outstanding notes that will be tendered and exchanged
for exchange notes in the exchange offer. We expect that a substantial portion
of the outstanding notes will be tendered and accepted in the exchange offer.
In that case, the trading market for the outstanding notes will be adversely
affected.
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Accounting Treatment
We will record the exchange notes in our accounting records at the same
carrying value as the outstanding notes, which is the aggregate principal
amount, as reflected in our accounting records on the date of exchange.
Accordingly, we will not recognize any gain or loss for accounting purposes in
connection with the exchange offer. We will record the expenses of the exchange
offer as incurred.
Other
Participation in the exchange offer is voluntary, and you should carefully
consider whether to accept. We urge you to consult your financial and tax
advisors in making your own decision on what action to take.
We may in the future seek to acquire untendered outstanding notes in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. We have no present plans to acquire any outstanding notes that
are not tendered in the exchange offer or to file a registration statement to
permit resales of any untendered outstanding notes.
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<PAGE>
DESCRIPTION OF THE EXCHANGE NOTES
The following is a summary description of the exchange notes, which we refer
to in this section as the "Exchange Notes". This section summarizes all of the
material terms of the Exchange Notes, but it is not complete and is qualified
by reference to all the provisions of the indenture. However, it does provide
an accurate summary of the material terms of the Exchange Notes.
For purposes of this section, the term "Company" refers only to Global
Crossing Holdings Ltd. and not to any of its Subsidiaries or GCL or any of its
Subsidiaries other than Global Crossings Holdings Ltd. In addition, for
purposes of this section, the term "GCL" refers only to Global Crossing Ltd.
and not to any of its Subsidiaries. In this section, we refer to the
outstanding notes as the "Notes". We define other capitalized terms under "--
Certain Definitions" beginning on page 69.
General
The Exchange Notes will be issued under an Indenture, dated as of November
19, 1999 (the "Indenture"), between the Company and United States Trust Company
of New York, as trustee (the "Trustee"). A copy of the Indenture is filed as an
exhibit to the registration statement of which this prospectus is a part. The
terms of the Exchange Notes will include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act. The
Exchange Notes will be subject to all those terms, and we refer Holders of
Exchange Notes to the Indenture and the Trust Indenture Act for a statement of
those terms.
The following summary of the material provisions of the Indenture does not
purport to be complete and is qualified in its entirety by reference to the
Indenture, including the definitions in the Indenture of certain terms used
below. Copies of the form of Indenture and Registration Rights Agreement are
available as provided below under "--Additional Information" on page 69.
As of the date of the Indenture, all of the Company's Subsidiaries will be
Restricted Subsidiaries, except for the PC-1 Subsidiaries, which will be
Unrestricted Subsidiaries. GCL and Frontier are also Restricted Subsidiaries.
Under certain circumstances, the Company will be able to designate existing or
future Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries
will not be subject to many of the restrictive covenants contained in the
Indenture. The Company at its election may also designate any other Subsidiary
of GCL or any Subsidiary of Frontier as a Restricted Subsidiary.
Terms of Notes
The Exchange Notes will be general unsecured obligations of the Company and
will rank pari passu in right of payment with all existing and future unsecured
senior Indebtedness of the Company. The Exchange Notes will rank senior in
right of payment to all subordinated Indebtedness of the Company that may be
issued in the future, if any.
The Company conducts substantially all of its operations through its
Subsidiaries and, therefore, the Company is dependent on the cash flow of its
Subsidiaries to meet its obligations, including its obligations with respect to
the Exchange Notes. The Exchange Notes will be effectively subordinated to all
Indebtedness and other liabilities and commitments, including trade payables
and lease obligations, of the Company's Subsidiaries. Any right of the Company
to receive assets of any of its Subsidiaries upon the Subsidiary's liquidation
or reorganization, and the consequent right of the Holders of the Exchange
Notes to participate in those assets, will be effectively subordinated to the
claims of that Subsidiary's creditors, except to the extent that the Company is
itself recognized as a creditor of that Subsidiary, in which case the claims of
the Company would still be subordinate to any security in the assets of that
Subsidiary and any indebtedness of that Subsidiary that is senior to that held
by the Company. As of September 30, 1999, on a pro forma basis after giving
effect to (1) the offering of the outstanding notes and the application of the
net proceeds from that offering, (2) the offering of the 6 3/8% cumulative
convertible preferred stock of Global Crossing Ltd. completed on November 5,
1999, (3) the offering of the 7% cumulative convertible preferred stock of
Global Crossing Ltd. completed on December 15, 1999, (4) the offering of the 6
3/8% cumulative convertible preferred stock, series B, of Global Crossing Ltd.
in connection with the Hutchison Global Crossing joint venture and (5) the
Racal Telecom acquisition, the Company's Subsidiaries would have had
approximately $4,980 million of
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Indebtedness and other liabilities, including trade payables and lease
obligations, outstanding, to which the Exchange Notes would have been
effectively subordinated. See "Risk Factors Relating to the Exchange Notes--The
exchange notes will be effectively subordinated to our secured obligations and
to all indebtedness of our subsidiaries" on page 26.
Principal, Maturity and Interest
The Exchange Notes will be limited in aggregate principal amount to $2.0
billion, consisting of $900.0 million principal amount of 9 1/8% Senior Notes
due 2006 (the "Exchange Notes Due 2006") and $1.1 billion principal amount of 9
1/2% Senior Notes due 2009 (the "Exchange Notes Due 2009").
The Exchange Notes Due 2006 will mature on November 15, 2006. Interest on
the Exchange Notes Due 2006 will accrue at the rate of 9 1/8% per annum and
will be payable semi-annually in arrears on May 15 and November 15, commencing
on May 15, 2000, to Holders of record on the immediately preceding May 1 and
November 1. Interest on the Exchange Notes Due 2006 will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of original issuance. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.
The Exchange Notes Due 2009 will mature on November 15, 2009. Interest on
the Exchange Notes Due 2009 will accrue at the rate of 9 1/2% per annum and
will be payable semi-annually in arrears on May 15 and November 15, commencing
on May 15, 2000, to Holders of record on the immediately preceding May 1 and
November 1. Interest on the Exchange Notes Due 2009 will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of original issuance. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.
Principal, premium, if any, and interest on the Exchange Notes will be
payable at the office or agency of the Company maintained for that purpose
within the City and State of New York or, at the option of the Company, payment
of interest on the Exchange Notes may be made by check mailed to the Holders of
the Exchange Notes at their respective addresses included in the register of
Holders of Exchange Notes; provided that all payments of principal, premium, if
any, and interest on Exchange Notes the Holders of which have given wire
transfer instructions to the Company will be required to be made by wire
transfer of immediately available funds to the accounts specified by the
Holders of those Exchange Notes. Until otherwise designated by the Company, the
Company's office or agency in New York will be the office of the Trustee
maintained for that purpose. The Exchange Notes will be issued in denominations
of $1,000 and integral multiples of $1,000. The Trustee initially will be
Paying Agent and Registrar under the Indenture, and the Company may act as
Paying Agent or Registrar under the Indenture.
Guarantees
The Company's payment obligations with respect to the Exchange Notes will be
jointly and severally guaranteed (the "Guarantees") by GCL and each other
Person from time to time required to be a Guarantor. See "--Covenants--Future
Guarantees" on page 63. Each of the Guarantors will receive a fee from the
Company as consideration for its Guarantee, and the obligations of each
Guarantor under its Guarantee will be limited so as not to constitute a
fraudulent conveyance under applicable law. See "Risk Factors Relating to the
Exchange Notes--Fraudulent conveyance considerations may cause the exchange
notes to be voided or subordinated to all our other debts" on page 27.
The Indenture will provide that no Guarantor may consolidate with or merge
with or into, whether or not the Guarantor is the surviving Person, another
Person, whether or not affiliated with the Guarantor, unless:
(1) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger, if other than the
Guarantor, assumes all of the obligations of the Guarantor, under a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Exchange Notes, the Indenture and the registration
rights agreement described in "The Exchange Offer--Background of the
Exchange Offer" on page 37 (the "Registration Rights Agreement"); and
(2) immediately after giving effect to that transaction, no Default or
Event of Default exists.
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The provisions of this covenant will not be applicable to a sale, assignment,
transfer, conveyance or other disposition of assets between or among the
Guarantor and any other Guarantor or the Company or any of its Restricted
Subsidiaries.
The Indenture will provide that, in the event of a sale or other disposition
of all of the assets of any Guarantor, except for GCL, by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the
capital stock of any Guarantor, except for GCL, then that Guarantor, in the
event of a sale or other disposition, by way of such a merger, consolidation or
otherwise, of all of the capital stock of that Guarantor, or the Person
acquiring the property, in the event of a sale or other disposition of all of
the assets of that Guarantor, will be released and relieved of any obligations
under its Guarantee; provided that the Net Proceeds of that sale or other
disposition are applied in accordance with the applicable provisions of the
Indenture. See "--Repurchase at the Option of Holders--Asset Sales" on page 54.
Optional Redemption
Except as provided below and under "--Change of Control Redemption" and "--
Optional Tax Redemption", the Exchange Notes Due 2006 are not redeemable at the
Company's option at any time and the Exchange Notes Due 2009 are not redeemable
at the Company's option before November 15, 2004. Thereafter, the Exchange
Notes Due 2009 are subject to redemption at any time at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices, expressed as percentages of principal amount,
provided below, plus accrued and unpaid interest on the Exchange Notes Due 2009
to the applicable redemption date, if redeemed during the twelve-month period
beginning on November 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004.............................. 104.750%
2005.............................. 103.167%
2006.............................. 101.583%
2007 and thereafter............... 100.000%
</TABLE>
Equity Offering Redemption
Notwithstanding the above, at any time before November 15, 2002, the Company
may, on any one or more occasions, redeem up to 25% of the aggregate principal
amount of the Exchange Notes Due 2009 originally issued under the Indenture at
a redemption price of 109.50% of the principal amount of the Exchange Notes Due
2009, plus accrued and unpaid interest on the Exchange Notes Due 2009 to the
redemption date, with the net cash proceeds received from one or more Equity
Offerings made by the Company or GCL, to the extent the net cash proceeds
received by GCL were contributed to the Company as common equity capital;
provided that at least 75% of the aggregate principal amount of Exchange Notes
Due 2009 originally issued under the Indenture remain outstanding immediately
after the occurrence of the redemption. The Company may make the redemption
upon not less than 30 nor more than 60 days' notice, but in no event more than
90 days after the closing of the related Equity Offering. Notice may be given
before the completion of the related Equity Offering and the redemption may, at
the Company's discretion, be subject to the satisfaction of one or more
conditions precedent, including the completion of the related Equity Offering.
Change of Control Redemption
In addition, (1) at any time before November 15, 2004, the Exchange Notes
Due 2009 may be redeemed at the option of the Company and (2) at any time
before their maturity, the Exchange Notes Due 2006 may be redeemed at the
option of the Company, in each case, in whole but not in part, upon the
occurrence of a Change of Control, upon not less than 30 nor more than 60 days'
prior notice, but in no event may the redemption occur more than 90 days after
the occurrence of the Change of Control, mailed by first-class mail to each
Holder's registered address, at a redemption price equal to 100% of the
principal amount of the Exchange Notes being redeemed plus the relevant
Applicable Premium as of, and accrued and unpaid interest, if any, to the date
of redemption (the "Redemption Date").
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"Applicable Premium" means:
(1) with respect to any Exchange Note Due 2009 on any Redemption Date,
the greater of (a) 1.0% of the principal amount of that Exchange Note or
(b) the excess of (A) the present value at the Redemption Date of the
redemption price of that Exchange Note at November 15, 2004, which
redemption price is provided in the table above, plus all required interest
payments due on that Exchange Note through November 15, 2004, excluding
accrued but unpaid interest, computed using a discount rate equal to the
relevant Treasury Rate plus 50 basis points over (B) the principal amount
of that Exchange Note, if greater; and
(2) with respect to any Exchange Note Due 2006 on any Redemption Date,
the greater of (a) 1.0% of the principal amount of that Exchange Note or
(b) the excess of (A) the present value at the Redemption Date of 100.000%
of the principal amount of that Exchange Note plus all required interest
payments due on that Exchange Note through November 15, 2006, excluding
accrued but unpaid interest, computed using a discount rate equal to the
relevant Treasury Rate plus 50 basis points over (B) the principal amount
of that Exchange Note, if greater.
"Treasury Rate" means:
(1) with respect to the calculation of the Applicable Premium for any
Exchange Note Due 2009 as of any Redemption Date, the yield to maturity as
of the Redemption Date of United States Treasury securities with a constant
maturity -- as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least
two Business Days before the Redemption Date or, if that Statistical
Release is no longer published, any publicly available source of similar
market data -- most nearly equal to the period from the Redemption Date to
November 15, 2004; provided, however, that if the period from the
Redemption Date to November 15, 2004 is less than one year, the weekly
average yield on actually traded United States Treasury securities adjusted
to a constant maturity of one year will be used; and
(2) with respect to the calculation of the Applicable Premium for any
Exchange Note Due 2006 as of any Redemption Date, the yield to maturity as
of the Redemption Date of United States Treasury securities with a constant
maturity -- as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least
two Business Days before the Redemption Date or, if that Statistical
Release is no longer published, any publicly available source of similar
market data -- most nearly equal to the period from the Redemption Date to
November 15, 2006; provided, however, that if the period from the
Redemption Date to November 15, 2006 is less than one year, the weekly
average yield on actually traded United States Treasury securities adjusted
to a constant maturity of one year will be used.
Optional Tax Redemption
The Exchange Notes are subject to redemption at the option of the Company or
a successor corporation at any time, in whole but not in part, upon not less
than 30 nor more than 60 days' notice, at a redemption price equal to the
principal amount of the Exchange Notes, plus accrued and unpaid interest on the
Exchange Notes to the redemption date if, as a result of any change in or
amendment to the laws or any regulations or ruling promulgated under the laws
of:
(1) Bermuda or any political subdivision or governmental authority of
Bermuda or having the power to tax in Bermuda;
(2) any jurisdiction, other than the United States, from or through
which payment on the Exchange Notes is made by the Company or a successor
corporation, or its paying agent in its capacity as such or any political
subdivision or governmental authority of that jurisdiction or having the
power to tax in that jurisdiction; or
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(3) any other jurisdiction, other than the United States, in which the
Company or a successor corporation is organized, or any political
subdivision or governmental authority of that jurisdiction or having the
power to tax in that jurisdiction,
or any change in the official application or interpretation of those laws,
regulations or rulings, or any change in the official application or
interpretation of, or any execution of or amendment to, any treaty or treaties
affecting taxation to which that jurisdiction, or that political subdivision or
taxing authority, is a party (a "Change in Tax Law"), which becomes effective
on or after the date of this prospectus, the Company or a successor corporation
is or would be required on the next succeeding interest payment date to pay
Additional Amounts with respect to the Exchange Notes, as described below under
"--Payment of Additional Amounts", and the payment of the Additional Amounts
cannot be avoided by the use of any reasonable measures available to the
Company or a successor corporation.
In addition, the Exchange Notes are subject to redemption at the option of
the Company at any time, in whole but not in part, upon not less than 30 nor
more than 60 days' notice, at a redemption price equal to the principal amount
of the Exchange Notes, plus accrued and unpaid interest on the Exchange Notes
to the redemption date, if the Person formed by a consolidation or amalgamation
of the Company or into which the Company is merged or to which the Company
conveys, transfers or leases its properties and assets substantially as an
entirety is required, as a consequence of the consolidation, amalgamation,
merger, conveyance, transfer or lease and as a consequence of a Change in Tax
Law occurring after the date of the consolidation, amalgamation, merger,
conveyance, transfer or lease, to pay Additional Amounts in respect of any tax,
assessment or governmental charge imposed on any Holder of Exchange Notes.
Payment of Additional Amounts
If any deduction or withholding for any present or future taxes, assessments
or other governmental charges of:
(1) Bermuda or any political subdivision or governmental authority of
Bermuda or having power to tax in Bermuda;
(2) any jurisdiction, other than the United States, from or through
which payment on the Exchange Notes is made by the Company or a successor
corporation, or its paying agent in its capacity as such or any political
subdivision or governmental authority of that jurisdiction or having the
power to tax in that jurisdiction; or
(3) any other jurisdiction, other than the United States, in which the
Company or a successor corporation is organized, or any political
subdivision or governmental authority of that jurisdiction or having the
power to tax in that jurisdiction
will at any time be required by that jurisdiction, or any such political
subdivision or taxing authority, in respect of any amounts to be paid by the
Company or a successor corporation under the Exchange Notes, the Company or a
successor corporation will pay to each Holder of Exchange Notes as additional
interest, those additional amounts ("Additional Amounts") as may be necessary
in order that the net amounts paid to that holder of those Exchange Notes who,
with respect to any such tax, assessment or other governmental charge, is not
resident in, or a citizen of, that jurisdiction, after that deduction or
withholding, will be not less than the amount specified in those Exchange Notes
to which that Holder is entitled; provided, however, that the Company or a
successor corporation will not be required to make any payment of Additional
Amounts for or on account of:
(a) any tax, assessment or other governmental charge that would not have
been imposed but for (A) the existence of any present or former connection
between that Holder or between a fiduciary, settlor, beneficiary, member or
shareholder of, or possessor of a power over, that Holder, if that Holder
is an estate, trust, partnership, limited liability company or corporation,
and the taxing jurisdiction or any
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political subdivision or territory or possession of the taxing jurisdiction
or area subject to its jurisdiction, including that Holder or the
fiduciary, settlor, beneficiary, member, shareholder or possessor being or
having been a citizen or resident of the taxing jurisdiction or being or
having been present or engaged in a trade or business in the taxing
jurisdiction or having or having had a permanent establishment in the
taxing jurisdiction, (B) the presentation of an Exchange Note, where
presentation is required, for payment on a date more than 30 days after (x)
the date on which that payment became due and payable or (y) the date on
which payment thereof is duly provided for, whichever occurs later, or (C)
the presentation of an Exchange Note for payment in Bermuda or any
political subdivision of Bermuda, unless that Exchange Note could not have
been presented for payment elsewhere;
(b) any estate, inheritance, gift, sales, transfer, personal property or
similar tax, assessment or other governmental charge;
(c) any tax, assessment or other governmental charge that is payable
otherwise than by withholding from payment of principal of, premium, if
any, or any interest on the Exchange Notes;
(d) any tax, assessment or other governmental charge that is imposed or
withheld by reason of the failure by the Holder or the beneficial owner of
the Exchange Note to comply with a request of the Company addressed to the
Holder (A) to provide information, documents or other evidence concerning
the nationality, residence or identity of the Holder or the beneficial
owner or (B) to make and deliver any declaration or other similar claim --
other than a claim for refund of a tax, assessment or other governmental
charge withheld by the Company -- or satisfy any information or reporting
requirements, which, in the case of (A) or (B), is required or imposed by a
statute, treaty, regulation or administrative practice of the taxing
jurisdiction as a precondition to exemption from all or part of that tax,
assessment or other governmental charge; or
(e) any combination of items (a), (b), (c) and (d) above;
nor will Additional Amounts be paid with respect to any payment of the
principal of, or any premium or interest on, any Exchange Note to any Holder
who is a fiduciary or partnership or limited liability company or other than
the sole beneficial owner of that payment to the extent that the payment would
be required by the laws of:
(A) Bermuda or any political subdivision or governmental authority of
Bermuda or having the power to tax in Bermuda;
(B) any jurisdiction, other than the United States, from or through
which payment on the Exchange Notes is made by the Company or a successor
corporation, or its paying agent in its capacity as such or any political
subdivision or governmental authority of that jurisdiction or having the
power to tax in that jurisdiction; or
(C) any other jurisdiction, other than the United States, in which the
Company or a successor corporation is organized, or any political
subdivision or governmental authority of that jurisdiction or having the
power to tax in that jurisdiction
to be included in the income for tax purposes of a beneficiary or settlor with
respect to that fiduciary or a member of that partnership, limited liability
company or beneficial owner who would not have been entitled to those
Additional Amounts had it been the Holder of that Exchange Note.
The Company will provide the Trustee with the official acknowledgment of the
relevant taxing authority or, if the acknowledgment is not available, a
certified copy of the acknowledgement evidencing the payment of the withholding
taxes, if any, by the Company. Copies of the documentation will be made
available to the Holders of the Exchange Notes or the Paying Agent, as
applicable, upon request.
All references in this prospectus to principal of, premium, if any, and
interest on the Exchange Notes will include any Additional Amounts payable by
the Company in respect of the principal, premium, if any, and interest on the
Exchange Notes.
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Selection and Notice
If less than all of the Exchange Notes are to be redeemed at any time,
selection of Exchange Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Exchange Notes are then listed, or, if the Exchange Notes
are not so then listed, on a pro rata basis, by lot or by the method that the
Trustee will deem fair and appropriate; provided that no Exchange Notes of
$1,000 or less will be redeemed in part. Notices of redemption will be mailed
by first class mail at least 30 but not more than 60 days before the redemption
date to each Holder of Exchange Notes to be redeemed at its registered address.
Notices of redemption may not be conditional. If any Exchange Note is to be
redeemed in part only, the notice of redemption that relates to the Exchange
Note will state the portion of the principal amount of the Exchange Note to be
redeemed. A new Exchange Note in principal amount equal to the unredeemed
portion of the Exchange Note will be issued in the name of the Holder upon
cancellation of the original Exchange Note. Exchange Notes called for
redemption will become due on the date fixed for redemption. On and after the
redemption date, interest will cease to accrue on Exchange Notes or portions of
Exchange Notes called for redemption.
Mandatory Redemption
Except as provided below under "--Repurchase at the Option of Holders", the
Company will not be required to make mandatory redemption or sinking fund
payments with respect to the Exchange Notes.
Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, each Holder of Exchange Notes
will have the right to require the Company to purchase all or any part, equal
to $1,000 or an integral multiple of $1,000, of the Holder's Exchange Notes in
the offer described below (the "Change of Control Offer") at a purchase price
in cash (the "Change of Control Payment") equal to 101% of the aggregate
principal amount of the Exchange Notes, plus accrued and unpaid interest on the
Exchange Notes to the date of purchase, subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date; provided, however, that the Company will not be
obligated to repurchase Exchange Notes as provided in this covenant in the
event that it has exercised its rights to redeem all of the Exchange Notes as
described above under "--Optional Redemption". Within 30 days following any
Change of Control, the Company will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to purchase Exchange Notes on the date specified in the notice, which date will
be no earlier than 30 and no later than 60 days from the date the notice is
mailed (the "Change of Control Payment Date"), in accordance with the
procedures required by the Indenture and described in the notice.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations to the extent those
laws and regulations are applicable in connection with the purchase of Exchange
Notes as a result of a Change of Control. To the extent that the provisions of
any securities laws or regulations conflict with any of the provisions of this
covenant, the Company will comply with the applicable securities laws and
regulations and will be deemed not to have breached its obligations under this
covenant by virtue of that compliance.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Exchange Notes or portions of Exchange Notes
properly tendered pursuant to the Change of Control Offer, (2) deposit with the
Paying Agent an amount equal to the Change of Control Payment in respect of all
Exchange Notes or portions of Exchange Notes so tendered and (3) deliver or
cause to be delivered to the Trustee Exchange Notes so accepted together with
an Officers' Certificate stating the aggregate principal amount of Exchange
Notes or portions of Exchange Notes being purchased by the Company. The Paying
Agent will promptly mail or deliver to each Holder of Exchange Notes so
tendered the Change of Control Payment for
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the Exchange Notes, and the Trustee will promptly authenticate and mail or
deliver, or cause to be transferred by book entry, to each Holder a new
Exchange Note equal in principal amount to any unpurchased portion of Exchange
Notes surrendered, if any; provided that that new Exchange Note will be in a
principal amount of $1,000 or an integral multiple of $1,000. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture will not
contain provisions that permit the Holders of the Exchange Notes to require
that the Company purchase or redeem the Exchange Notes in the event of a
takeover, recapitalization or similar transaction. The Company's ability to
purchase Exchange Notes upon a Change of Control may be limited by the
Company's then existing financial resources. There can be no assurance that
sufficient funds will be available when necessary to make any such required
purchases. See "Risk Factors Relating to the Exchange Notes--We may not be able
to fund a change of control offer" on page 27.
The Company will not be required to make a Change of Control Offer upon the
occurrence of a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements included in the Indenture applicable to a Change of Control Offer
made by the Company, and purchases all Exchange Notes validly tendered and not
withdrawn under the Change of Control Offer.
Asset Sales
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, consummate any Asset Sale, unless:
(1) the Company, or the Restricted Subsidiary, as the case may be,
receives consideration at the time of the Asset Sale at least equal to the
fair market value -- as determined in good faith by the Board of Directors,
including as to the value of all noncash consideration, and included in an
Officers' Certificate delivered to the Trustee -- of the assets or Equity
Interests issued or sold or otherwise disposed of; and
(2) at least 75% of the consideration for the Asset Sale is in the form
of cash and/or Cash Equivalents; and
(3) the Net Proceeds received by the Company or the Restricted
Subsidiary, as the case may be, from the Asset Sale are applied within 360
days following the receipt of the Net Proceeds (a) first, to the extent the
Company or that Restricted Subsidiary, as the case may be, elects, to the
redemption or repurchase of outstanding pari passu Indebtedness of the
Company or Purchase Money Indebtedness of any Restricted Subsidiary;
provided that in the event that that Restricted Subsidiary is a Guarantor,
the Purchase Money Indebtedness to be redeemed or repurchased ranks at
least pari passu to the Guarantee given by that Restricted Subsidiary and
(b) second, to the extent of the balance of the Net Proceeds after
application as described in (a) above and to the extent the Company or that
Restricted Subsidiary, as the case may be, elects to reinvest or enter into
a legally binding agreement to reinvest the Net Proceeds, or any portion of
the Net Proceeds, in assets that are used or useful in a Permitted
Business. The balance of the Net Proceeds, after the application of the Net
Proceeds as described in the immediately preceding clauses (a) and (b) will
constitute "Excess Proceeds".
When the aggregate amount of Excess Proceeds equals or exceeds $15.0
million, taking into account income earned on the Excess Proceeds, the Company
will be required to make an offer to all Holders of Exchange Notes and pari
passu Indebtedness (an "Asset Sale Offer") to purchase the maximum principal
amount of Exchange Notes and pari passu Indebtedness that may be purchased out
of the Excess Proceeds, at a purchase price in cash in an amount equal to 100%
of the principal amount of those Exchange Notes, plus accrued and unpaid
interest on those Exchange Notes to the date of purchase, in accordance with
the procedures provided in the Indenture and the agreements governing the pari
passu Indebtedness. To the extent
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that any Excess Proceeds remain after consummation of an Asset Sale Offer, the
Company may use the Excess Proceeds for any purpose not otherwise prohibited by
the Indenture. If the aggregate principal amount of Exchange Notes and pari
passu Indebtedness tendered into the Asset Sale Offer surrendered by Holders of
Exchange Notes exceeds the amount of Excess Proceeds, the Trustee will select
the Exchange Notes and pari passu Indebtedness to be purchased on a pro rata
basis. Upon completion of the Asset Sale Offer, the amount of Excess Proceeds
will be reset at zero for purposes of the first sentence of this paragraph.
The amount of (a) any liabilities, as shown on the Company's or any
Restricted Subsidiary's, as the case may be, most recent balance sheet, of the
Company or any Restricted Subsidiary, other than contingent liabilities and
liabilities that are by their terms subordinated to the Exchange Notes or any
guarantee of the Exchange Notes, that are assumed by the transferee of any
assets under an agreement that releases the Company or any Restricted
Subsidiary from all liability in respect of those assets, (b) Indebtedness of
any Restricted Subsidiary that is no longer a Restricted Subsidiary as a result
of the Asset Sale, to the extent that the Company and each other Restricted
Subsidiary are released from any guarantee of payment of the principal amount
of that Indebtedness in connection with that Asset Sale and (c) any securities,
notes or other obligations received by the Company or that Restricted
Subsidiary, as the case may be, from that transferee that are
contemporaneously, subject to ordinary settlement periods, converted by the
Company or that Restricted Subsidiary, as the case may be, into cash and/or
Cash Equivalents, to the extent of the cash and/or Cash Equivalents received,
will be deemed to be cash and/or Cash Equivalents for purposes of this
provision.
Covenants
Restricted Payments
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of the Company's or any of its Restricted
Subsidiaries' Equity Interests, including any payment in connection with
any merger or consolidation involving the Company or any of its Restricted
Subsidiaries, or to the direct or indirect holders of the Company's or any
of its Restricted Subsidiaries' Equity Interests, other than dividends or
distributions payable in Equity Interests, other than Disqualified Stock,
of the Company or to the Company or a Restricted Subsidiary of the Company;
(2) purchase, redeem or otherwise acquire or retire for value, including
in connection with any merger or consolidation involving the Company, any
Equity Interests of the Company or any direct or indirect parent of the
Company, other than the Equity Interests owned by the Company or any
Wholly-Owned Restricted Subsidiary of the Company;
(3) make any payment on or with respect to, or purchase, redeem, defease
or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Exchange Notes, except a payment of interest or
principal at Stated Maturity; or
(4) make any Restricted Investment;
all the payments and other actions set forth in clauses (1) through (4) above
being collectively referred to as "Restricted Payments", unless:
(a) at the time of and after giving effect to that Restricted Payment,
no Default or Event of Default will have occurred and be continuing or
would occur as a consequence of that Restricted Payment;
(b) in the case of clauses (1), (2) and (3) above, and, in the case of
any Restricted Investment that is not an Investment in a Permitted
Business, the Company would, at the time of that Restricted Payment and
after giving pro forma effect to that Restricted Payment as if that
Restricted Payment had been made at the beginning of the applicable four-
quarter period, have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to either clause (1) or (2) of the first paragraph of
the covenant described below under the caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock"; and
(c) the Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries and any Permitted Investments made pursuant to clause (8)
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of the definition of Permitted Investments after May 18, 1998 -- excluding
Restricted Payments permitted by clauses (2), (3), (4), (6) and (7), but,
in the case of clause (7), only to the extent that those Restricted
Payments are reflected as an expense on the income statements of GCL, of
the next succeeding paragraph -- is less than the sum, without duplication,
of:
(A) the remainder of (x) 100% of the cumulative Consolidated Cash
Flow or, in the case Consolidated Cash Flow will be negative, less 100%
of that deficit for the period, taken as one accounting period,
beginning on March 31, 1998 and ending on the last day of the last full
fiscal quarter immediately preceding the date of that Restricted
Payment minus (y) the product of 1.5 times the cumulative Consolidated
Interest Expense from May 18, 1998 through the last day of the last
full fiscal quarter immediately preceding the date of that Restricted
Payment, plus
(B) 100% of the aggregate net cash proceeds and the fair market
value, as determined in good faith by the Board of Directors, of
property or assets received by the Company since May 18, 1998 as a
contribution to its common equity capital or from the issue or sale of
Equity Interests of the Company, other than Disqualified Stock, or from
the issue or sale of Disqualified Stock or debt securities of the
Company that have been converted into those Equity Interests, other
than Equity Interests or Disqualified Stock or convertible debt
securities sold to a Subsidiary of the Company, plus the amount of cash
or the fair market value, as determined above, of property or assets
received by the Company or any Restricted Subsidiary upon the
conversion or exchange, plus
(C) the aggregate amount equal to the net reduction in Investments
in Unrestricted Subsidiaries resulting from (x) dividends,
distributions, interest payments, return of capital, repayments of
Investments or other transfers of assets to the Company or any
Restricted Subsidiary from any Unrestricted Subsidiary, (y) proceeds
realized by the Company or any Restricted Subsidiary upon the sale of
any Investments to a Person other than GCL, the Company or any
Subsidiary of the Company or (z) the redesignation of any Unrestricted
Subsidiary as a Restricted Subsidiary, not to exceed in the case of any
of the immediately preceding clauses (x), (y) or (z) the aggregate
amount of Restricted Investments made by the Company or any Restricted
Subsidiary in any Unrestricted Subsidiary after the date of the
Indenture, plus
(D) to the extent that any Restricted Investment that was made after
the date of the Indenture is sold for cash or otherwise liquidated or
repaid for cash, the amount of proceeds, net of any cost of
disposition, equal to the initial amount of that Restricted Investment.
The above provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration of that dividend, if at the date of declaration that payment
would have complied with the foregoing provisions;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the
Company in exchange for or out of the net cash proceeds of the
substantially concurrent sale, other than to a Subsidiary of the Company,
of other Equity Interests of the Company, other than any Disqualified
Stock; provided that the amount of any net cash proceeds that are utilized
for any redemption, repurchase, retirement, defeasance or other acquisition
will be excluded from clause (c)(B) of the preceding paragraph;
(3) the defeasance, redemption, retirement, repurchase or other
acquisition of Indebtedness with the net cash proceeds from an incurrence
of Permitted Refinancing Indebtedness;
(4) the payment of any dividend by a Restricted Subsidiary of the
Company to the holders of its Equity Interests on a pro rata basis;
(5) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company or any of its Restricted
Subsidiaries held by any member of the Company's or any Restricted
Subsidiary's management; provided that the aggregate price paid for all the
repurchased, redeemed,
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acquired or retired Equity Interests will not exceed $10.0 million in any
twelve-month period, with unused amounts being carried over to succeeding
twelve-month periods, subject to a maximum of $15.0 million in any twelve-
month period;
(6) Investments made with the net cash proceeds received from an Equity
Offering made by the Company or GCL, but only to the extent those net cash
proceeds received by GCL were contributed to the Company as common equity
capital, provided that the amount of those net cash proceeds received by
GCL that are utilized for that Investment be excluded from clause (c)(B) of
the preceding paragraph plus 50% of the net gain realized and not otherwise
included in Consolidated Cash Flow from the sale of Restricted Investments;
(7) the payment of any dividend or the making of any distribution to GCL
by the Company or any Restricted Subsidiary to pay or permit GCL to pay any
GCL Expenses or any Related Taxes; and
(8) other Restricted Payments in an aggregate amount not to exceed $25.0
million.
The Board of Directors may not designate any Subsidiary of the Company --
other than a newly-created Subsidiary in which no Investment has previously
been made, other than the amount required to capitalize that Subsidiary in
connection with its organization -- as an Unrestricted Subsidiary (a
"Designation") unless:
(1) no Default or Event of Default will have occurred and be continuing
at the time of or after giving effect to that Designation;
(2) the Company would, immediately after giving effect to that
Designation, have been permitted to incur at least $1.00 of additional
Indebtedness under either clause (1) or (2) of the first paragraph of the
covenant described below under the caption "--Incurrence of Indebtedness
and Issuance of Preferred Stock"; and
(3) the Company would not be prohibited under this Indenture from making
an Investment at the time of that Designation, assuming the effectiveness
of that Designation for purposes of clauses (a) and (b) of the first
paragraph of this covenant, in an amount equal to the fair market value of
the net Investment of the Company or any other Restricted Subsidiary in the
Subsidiary on that date.
In the event of any Designation, all outstanding Investments owned by the
Company and its Restricted Subsidiaries in the Subsidiary so designated will be
deemed to be an Investment made as of the time of that Designation and will
reduce the amount available for Restricted Payments under the first paragraph
of this covenant or Permitted Investments, as applicable. All those outstanding
Investments will be deemed to constitute Restricted Payments in an amount equal
to the fair market value of those Investments at the time of that Designation.
The Indenture will further provide that a Designation may be revoked (a
"Revocation") by a resolution of the Board of Directors delivered to the
Trustee, provided that the Company will not make any Revocation unless:
(1) no Default or Event of Default will have occurred and be continuing
at the time of or after giving effect to that Designation; and
(2) all Liens and Indebtedness of the Unrestricted Subsidiary
outstanding immediately following that Revocation would, if incurred at
that time, have been permitted to be incurred at such time for all purposes
under the Indenture.
The amount of all Restricted Payments, other than cash, will be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or the
Restricted Subsidiary, as the case may be regarding the Restricted Payment. The
fair market value of any asset(s) or securities that are required to be valued
by this covenant will be determined in good faith by the Board of Directors,
that determination to be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds $15.0 million.
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Incurrence of Indebtedness and Issuance of Preferred Stock
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness, including
Acquired Debt, and the Company will not issue any Disqualified Stock and will
not permit any of its Restricted Subsidiaries to issue any shares of preferred
stock; provided, however, that the Company may incur Indebtedness, including
Acquired Debt, or issue shares of Disqualified Stock and its Restricted
Subsidiaries may incur Indebtedness or issue Disqualified Stock or preferred
stock if either:
(1) the Consolidated Leverage Ratio is less than 5.5 to 1.0 before May
15, 2001, or 5.0 to 1.0 after May 15, 2001; or
(2) the Consolidated Capital Ratio is less than 2.5 to 1.0.
Notwithstanding the above, the provisions of the paragraph outlined above
will not apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Indebtedness"):
(a) the incurrence by the Company of Indebtedness represented by the
Notes and the Exchange Notes;
(b) the incurrence by the Company or any of its Restricted Subsidiaries
of Existing Indebtedness;
(c) the incurrence of Indebtedness by the Company to any Restricted
Subsidiary or Indebtedness of any Restricted Subsidiary to the Company or
any other Restricted Subsidiary, but only for so long as that Indebtedness
is held by the Company or the Restricted Subsidiary;
(d) the incurrence by the Company or any of its Restricted Subsidiaries
of Capital Lease Obligations, other than leases of backhaul services,
mortgage financings or purchase money obligations, in each case incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property, plant or equipment used in the
business of the Company or the Restricted Subsidiary, in an aggregate
principal amount not to exceed $25.0 million at any time outstanding;
(e) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness pursuant to acquisitions of capacity made in the ordinary
course of business;
(f) the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or
hedging interest or foreign currency exchange rate risk with respect to any
floating rate Indebtedness that is permitted by the terms of this Indenture
to be outstanding;
(g) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness of a Restricted Subsidiary incurred and outstanding on the
date on which the Restricted Subsidiary was acquired by the Company;
provided, however, that at the time the Restricted Subsidiary is acquired
by the Company, giving effect to that acquisition, the Company would have
been able to incur $1.00 of additional Indebtedness under the immediately
preceding paragraph;
(h) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace Indebtedness, other than
intercompany Indebtedness, that was permitted by the Indenture to be
incurred under the immediately preceding paragraph or clauses (a), (b),
(d), (g), (h), (i), (k), (n) or (o) of this paragraph;
(i) the incurrence by the Company or any of its Restricted Subsidiaries
of additional Indebtedness not otherwise permitted to be incurred under
this paragraph in an aggregate principal amount, or accreted value, as
applicable, at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness
incurred under to this clause (i), not to exceed $50.0 million;
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(j) the incurrence of Indebtedness by a Receivables Entity in a
Qualified Receivables Transaction, provided that the proceeds of that
Indebtedness are applied in accordance with the covenant described above
under the caption "--Repurchase at the Option of Holders--Asset Sales";
(k) the incurrence by the Company or any Restricted Subsidiary of
Purchase Money Indebtedness, provided that the amount of that Purchase
Money Indebtedness does not exceed 100% of the cost of construction,
installation, acquisition, lease, development, design, engineering,
financing, testing, start-up, upgrade, completion or improvement of assets,
together with related costs and expenses, used in the business of the
Company or the Restricted Subsidiary;
(l) letters of Credit that are cash collateralized;
(m) letters of Credit in an aggregate principal amount equal to $200.0
million less the amount of outstanding Indebtedness under clause (n) of
this paragraph;
(n) the incurrence by the Company or any of its Restricted Subsidiaries
of revolving credit Indebtedness in an aggregate amount not to exceed
$200.0 million at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness
incurred under this clause (n); and
(o) the guarantee by the Company or any Restricted Subsidiary of
Indebtedness of the Company or any Restricted Subsidiary of the Company
that was permitted to be incurred by another provision of this covenant.
The Company will not, and will not permit any of its Restricted Subsidiaries
to, incur any Indebtedness, including Permitted Indebtedness, that is
contractually subordinated in right of payment to any other Indebtedness of the
Company or the Restricted Subsidiary unless that Indebtedness is also
contractually subordinated in right of payment to the Exchange Notes on
substantially identical terms; provided, however, that no Indebtedness of the
Company will be deemed to be contractually subordinated in right of payment to
any other Indebtedness of the Company solely by virtue of being unsecured.
Liens
The Company will not, and will not permit any of its Restricted Subsidiaries
to, create, incur, assume or otherwise cause or suffer to exist or become
effective any Lien of any kind, other than Permitted Liens, upon any of their
property or assets, now owned or acquired in the future, unless all payments
due under the Indenture and the Exchange Notes are secured on an equal and
ratable basis with the obligations so secured until the time when those
obligations are no longer secured by a Lien.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(1) (a) pay dividends or make any other distributions to the Company or
any of its Restricted Subsidiaries (A) on its Capital Stock or (B) with
respect to any other interest or participation in, or measured by, its
profits or (b) pay any indebtedness owed to the Company or any of its
Restricted Subsidiaries;
(2) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(3) transfer any of its properties or assets to the Company or any of
its Restricted Subsidiaries.
However, the above restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(a) Existing Indebtedness as in effect on the date of the Indenture;
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(b) agreements as in effect as of the date of the Indenture;
(c) Indebtedness incurred in accordance with clause (g), (h), (i), (k)
or (n) of the second paragraph of the covenant described above under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock",
provided that those encumbrances or restrictions are customary with respect
to those types of Indebtedness, as determined in good faith by the Chief
Financial Officer of the Company, and provided further that the provisions
of that Indebtedness do not prohibit payments by the Company of principal,
premium, interest and Additional Amounts under the terms of the Exchange
Notes and the Indenture;
(d) the Indenture, the Notes and the Exchange Notes;
(e) applicable law;
(f) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Restricted Subsidiaries as in effect
at the time of the acquisition, except to the extent the Indebtedness was
incurred in connection with or in contemplation of the acquisition, which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired, provided that, in the case of
Indebtedness, that Indebtedness was permitted by the terms of the Indenture
to be incurred;
(g) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;
(h) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in
clause (3) above on the property so acquired;
(i) any agreement for the sale or other disposition of a Restricted
Subsidiary that restricts distributions by that Restricted Subsidiary
pending its sale or other disposition;
(j) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing the Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced;
(k) Liens securing Indebtedness otherwise permitted to be incurred
pursuant to the provisions of the covenant described above under the
caption "--Liens" that limit the right of the Company or any of its
Restricted Subsidiaries to dispose of the assets subject to those Liens;
(l) provisions with respect to the disposition or distribution of assets
or property in joint venture agreements and other similar agreements
entered into in the ordinary course of business; and
(m) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business.
Sale and Leaseback Transactions
The Company will not, and will not permit any of its Restricted Subsidiaries
to, enter into any sale and leaseback transaction; provided that the Company or
any of its Restricted Subsidiaries may enter into a sale and leaseback
transaction if:
(1) the Company or the Restricted Subsidiary, as the case may be, could
have (a) incurred Indebtedness in an amount equal to the Attributable Debt
relating to that sale and leaseback transaction pursuant to either of the
Consolidated Leverage Ratio or Consolidated Capital Ratio tests included in
the first paragraph of the covenant described above under the caption "--
Incurrence of Indebtedness and Issuance of Preferred Stock" and (b)
incurred a Lien to secure that Indebtedness pursuant to the covenant
described above under the caption "--Liens";
(2) the gross cash proceeds of that sale and leaseback transaction are
at least equal to the fair market value, as determined in good faith by the
Board of Directors and included in an Officers' Certificate delivered to
the Trustee, of the property that is the subject of that sale and leaseback
transaction; and
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(3) the transfer of assets in that sale and leaseback transaction is
treated as an Asset Sale, and the Company applies the proceeds of that
transaction in compliance with, the covenant described above under the
caption "--Repurchase at the Option of Holders--Asset Sales".
Merger, Consolidation or Sale of Assets
The Company may not, directly or indirectly, consolidate or merge with or
into, whether or not the Company is the surviving corporation, or sell, assign,
transfer, convey or otherwise dispose of all or substantially all of its
properties or assets, in one or more related transactions, to another Person
unless:
(1) the Company is the surviving corporation or the Person formed by or
surviving the consolidation or merger, if other than the Company, or to
which that sale, assignment, transfer, conveyance or other disposition will
have been made is a corporation organized or existing under the laws of the
United States, any state of the United States or the District of Columbia
or Bermuda;
(2) the Person formed by or surviving the consolidation or merger, if
other than the Company, or the Person to which that sale, assignment,
transfer, conveyance or other disposition will have been made assumes all
the obligations of the Company under the Registration Rights Agreement, the
Notes, the Exchange Notes and the Indenture under a supplemental indenture
in a form reasonably satisfactory to the Trustee;
(3) immediately after that transaction no Default or Event of Default
exists; and
(4) except in the case of a merger of the Company with or into a
Restricted Subsidiary of the Company, the Company or the Person formed by
or surviving the consolidation or merger, if other than the Company, or to
which the sale, assignment, transfer, conveyance or other disposition will
have been made (a) will have a Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the
Company immediately preceding the transaction and (b) will, immediately
after the transaction and after giving pro forma effect to the transaction
and any related financing transactions as if the same had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at
least $1.00 of additional Indebtedness under either clause (1) or (2) of
the first paragraph of the covenant described above under the caption "--
Incurrence of Indebtedness and Issuance of Preferred Stock".
The Indenture will also provide that the Company may not, directly or
indirectly, lease all or substantially all of its properties or assets, in
one or more related transactions, to any other Person. The provisions of
this covenant will not be applicable to a sale, assignment, transfer,
conveyance or other disposition of assets between or among the Company and
its Restricted Subsidiaries and any of the Guarantors.
Transactions with Affiliates
The Company will not, and will not permit any of its Restricted Subsidiaries
to, make any payment to, or sell, lease, transfer or otherwise dispose of any
of its properties or assets to, or purchase any property or assets from, or
enter into or make or amend any transaction, contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless:
(1) the Affiliate Transaction is on terms that are not materially less
favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or
the Restricted Subsidiary with an unrelated Person; and
(2) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $25.0
million, the Company delivers to the Trustee a resolution of the Board of
Directors included in an Officers' Certificate certifying that the
Affiliate Transaction complies with clause (1) above and that the Affiliate
Transaction is approved by a majority of the disinterested members of the
Board of Directors and an opinion as to the fairness to the Holders of the
Affiliate Transaction from a financial point of view is obtained from an
accounting, appraisal or investment banking firm of national standing.
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Notwithstanding the above, the following items will not be deemed to be
Affiliate Transactions:
(1) (a) the entering into, maintaining or performance of any employment
contract, collective bargaining agreement, benefit plan, program or
arrangement, related trust agreement or any other similar arrangement for
or with any employee, officer or director that have been or will be entered
into in the ordinary course of business, including vacation, health,
insurance, deferred compensation, retirement, savings or other similar
plans, (b) the payment of compensation, performance of indemnification or
contribution obligations, or an issuance, grant or award of stock, options,
or other equity-related interests or other securities to employees,
officers or directors in the ordinary course of business, (c) any
transaction with an officer or director in the ordinary course of business
not involving more than $250,000 in any one case or (d) Management Advances
and payments in respect of Management Advances;
(2) transactions between or among the Company and/or its Restricted
Subsidiaries or any Receivables Entity;
(3) payment of reasonable directors' fees;
(4) any sale or other issuance of Equity Interests, other than
Disqualified Stock, of the Company;
(5) Affiliate Transactions in effect or approved by the Board of
Directors on the date of the Indenture, including any amendments to the
indenture, provided that the terms of those amendments are not materially
less favorable to the Company or the relevant Restricted Subsidiary than
the terms of the agreement before those amendments;
(6) transactions with respect to capacity or dark fiber between the
Company or any Restricted Subsidiary and any Unrestricted Subsidiary or
other Affiliate and joint sales and marketing under an agreement or
agreements between the Company or any Restricted Subsidiary and any
Unrestricted Subsidiary or other Affiliate, provided that in the case of
this clause (6), those agreements are on terms that are no less favorable
to the Company or the relevant Restricted Subsidiary than those that could
have been obtained at the time of the transaction in an arm's-length
transaction with an unrelated third party or, in the case of a transaction
with an Unrestricted Subsidiary, are either (a) entered into in connection
with a transaction involving the selection by a customer of cable system
capacity entered into in the ordinary course of business or (b) involve the
provision by the Company or a Restricted Subsidiary to an Unrestricted
Subsidiary of sales and marketing services, operations, administration and
maintenance services or development services for which the Company or the
Restricted Subsidiary receives a fair rate of return, as determined by the
Board of Directors and included in an Officers' Certificate delivered to
the Trustee, above its expenses of providing those services;
(7) any transaction entered into in the ordinary course of business
between the Company or any Restricted Subsidiary and any Unrestricted
Subsidiary or any Affiliate, provided that in the case of this clause (7),
those agreements are on terms that are no less favorable to the Company or
the relevant Restricted Subsidiary than those that could have been obtained
at the time of the transaction in an arm's-length transaction with an
unrelated third party; and
(8) Restricted Payments that are permitted by the covenant described
above under the caption "--Restricted Payments".
Issuances and Sales of Equity Interests in Wholly-Owned Restricted
Subsidiaries
The Company:
(1) will not, and will not permit any of its Restricted Subsidiaries to,
transfer, convey, sell, lease or otherwise dispose of any Equity Interests
in any Wholly-Owned Restricted Subsidiary of the Company to any Person,
other than the Company or a Wholly-Owned Restricted Subsidiary of the
Company, unless (a) that transfer, conveyance, sale, lease or other
disposition is of all the Equity Interests in that Wholly-Owned Restricted
Subsidiary and (b) the cash Net Proceeds from that transfer, conveyance,
sale, lease or other disposition are applied in accordance with the
covenant described above under the caption "--Repurchase at the Option of
Holders--Asset Sales"; and
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(2) will not permit any Wholly-Owned Restricted Subsidiary of the
Company to issue any of its Equity Interests, other than, if necessary,
shares of its Capital Stock constituting directors' qualifying shares, to
any Person other than to the Company or a Wholly-Owned Restricted
Subsidiary of the Company.
Future Guarantees
If any Restricted Subsidiary guarantees any Debt Securities issued by the
Company, then:
(1) the Company will promptly notify the Trustee of that guarantee;
(2) the Trustee will, in turn, notify each Holder; and
(3) the Company will cause the Indenture to be amended to make that
Restricted Subsidiary a Guarantor under the Indenture.
Before the execution of the amendment, each Restricted Subsidiary required
to become a Guarantor pursuant to the provisions of this covenant will be
deemed a Guarantor under the Indenture for purposes of determining the rights
and obligations under the Indenture.
Business Activities
The Company will not, and will not permit any of its Restricted Subsidiaries
to, engage in any business other than a Permitted Business.
Payments for Consent
Neither the Company nor any of its Restricted Subsidiaries will, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Exchange Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the Exchange Notes unless that consideration is
offered to be paid or is paid to all Holders of the Exchange Notes that
consent, waive or agree to amend the terms or provisions of the Indenture or
the Exchange Notes in the time frame provided in the solicitation documents
relating to the consent, waiver or agreement.
Reports
Whether or not required by the rules and regulations of the SEC, so long as
any Exchange Notes are outstanding, the Company will furnish to the Trustee and
the Holders of the Exchange Notes:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms 10-Q and 10-K if
the Company was required to file those Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
that describes the financial condition and results of operations of the
Company and its consolidated Subsidiaries and, with respect to the annual
information only, a report on that annual information by the Company's
certified independent accountants; and
(2) all current reports that would be required to be filed with the SEC
on Form 8-K if the Company were required to file those reports, in each
case within the time periods specified in the SEC's rules and regulations.
In addition, whether or not required by the rules and regulations of the
SEC, the Company will file a copy of all the information and reports with the
SEC for public availability within the time periods specified in the SEC's
rules and regulations, unless the SEC will not accept such a filing, and make
the information available to securities analysts and prospective investors upon
request.
The Company will be deemed to have satisfied those requirements if GCL files
and provides reports, documents and information of the types otherwise so
required by the SEC, in each case within the applicable
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time periods, and the Company is not required by the SEC to file such reports,
documents and information separately under the applicable rules and regulations
of the SEC, after giving effect to any exemptive relief, because of the filings
by GCL. Furthermore, the Company will agree that, for so long as any Exchange
Notes remain outstanding and regardless of the immediately preceding sentence,
it will furnish to the Holders of the Exchange Notes and to securities analysts
and prospective investors, upon their request, the information required to be
delivered under Rule 144A(d)(4) under the Securities Act.
Events of Default and Remedies
The Indenture will provide that each of the following will constitute an
Event of Default with respect to the Exchange Notes of each series:
(1) default for 30 days in the payment when due of interest on the
Exchange Notes;
(2) default in the payment when due of the principal of, or premium, if
any, on, the Exchange Notes;
(3) failure by the Company or any of its Restricted Subsidiaries to
comply with the provisions described above under the captions "--Change of
Control", "--Asset Sales", "--Restricted Payments" or "--Incurrence of
Indebtedness and Issuance of Preferred Stock";
(4) failure by the Company or any of its Restricted Subsidiaries for 60
days after notice to comply with any of its other agreements in the
Indenture or the Exchange Notes;
(5) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries, or the payment of which is guaranteed by the Company or any
of its Restricted Subsidiaries, whether that Indebtedness or guarantee now
exists, or is created after the date of the Indenture, which default
results in the acceleration of that Indebtedness before its express
maturity and, in each case, the principal amount of that Indebtedness,
together with the principal amount of any other Indebtedness the maturity
of which has been so accelerated, aggregates $25.0 million or more;
(6) failure by the Company or any of its Restricted Subsidiaries to pay
final judgments not subject to appeal aggregating in excess of $25.0
million, net of applicable insurance coverage which is acknowledged in
writing by the insurer, which judgments are not paid, discharged or stayed
for a period of 60 days;
(7) except as provided by the Indenture, any Guarantee shall be held in
any judicial proceeding to be unenforceable or invalid or will cease for
any reason to be in full force and effect or any Guarantor, or any Person
acting on behalf of any Guarantor, will deny or disaffirm its obligations
under its Guarantee; and
(8) certain events of bankruptcy or insolvency with respect to the
Company or any of its Restricted Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Exchange Notes of
any series may declare all the Exchange Notes of that series to be due and
payable immediately. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency, with respect
to the Company, any Restricted Subsidiary that is a Significant Subsidiary or
any group of Restricted Subsidiaries that, taken together, would constitute a
Significant Subsidiary, all outstanding Exchange Notes will become due and
payable without further action or notice. Holders of the Exchange Notes may not
enforce the Indenture or the Exchange Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Exchange Notes of any series may direct the
Trustee in its exercise of any trust or power affecting that series of Exchange
Notes. The Trustee may withhold from Holders of the Exchange Notes notice of
any continuing Default or Event of Default -- except a Default or Event of
Default relating to the payment of principal of, premium, if any, or interest
on, the Exchange Notes -- if it determines that withholding notice is in their
interest.
In the case of any Event of Default occurring by reason of any willful
action or inaction taken or not taken by or on behalf of the Company with the
intention of avoiding payment of the premium that the Company
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would have had to pay if the Company then had elected to redeem the Exchange
Notes Due 2009 pursuant to the optional redemption provisions of the Indenture,
an equivalent premium also will become immediately due and payable, to the
extent permitted by law, upon the acceleration of the Exchange Notes Due 2009.
If an Event of Default occurs before November 15, 2004 by reason of any wilful
action or inaction taken or not taken by or on behalf of the Company with the
intention of avoiding the prohibition on redemption of the Exchange Notes Due
2009 before November 15, 2004, then the premium specified in the Indenture also
will become immediately due and payable, to the extent permitted by law, upon
the acceleration of the Exchange Notes Due 2009.
The Holders of a majority in aggregate principal amount of the then
outstanding Exchange Notes of any series by notice to the Trustee may on behalf
of the Holders of all of the Exchange Notes in that series waive any existing
Default or Event of Default and its consequences under the Indenture, except a
continuing Default or Event of Default in the payment of principal of, premium,
if any, or interest on, the Exchange Notes.
The Company will be required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company will be required upon
becoming aware of any Default or Event of Default to deliver to the Trustee a
statement specifying that Default or Event of Default.
No Personal Liability of Directors, Officers, Employees, Incorporators or
Shareholders
Subject to the Companies Act 1981 of Bermuda, no director, officer,
employee, incorporator or shareholder of the Company, as such, will have any
liability for any obligations of the Company with respect to the Exchange Notes
or the Indenture, or for any claim based on, or in respect or by reason of,
those obligations or their creation. Each Holder of Exchange Notes by accepting
an Exchange Note will waive and release any and all liability of that nature.
That waiver and release are part of the consideration for issuance of the
Exchange Notes. That waiver may not be effective to waive liabilities under
federal securities laws, and it is the view of the SEC that a waiver of that
type is against public policy.
Legal Defeasance and Covenant Defeasance
The obligations of the Company in the Indenture as they relate to any series
of Exchange Notes will be discharged and cancelled upon the delivery by the
Company to the Trustee for cancellation of all the Exchange Notes of that
series or upon irrevocable deposit with the Trustee, within not more than one
year before the redemption of the Exchange Notes of that series, or when the
Exchange Notes of that series are to be called for redemption within one year
under arrangements satisfactory to the Trustee, of funds sufficient for the
payment or redemption of all the Exchange Notes of that series. In addition,
the Indenture will provide that the Company may, at its option and at any time,
elect to have all of its obligations discharged with respect to the outstanding
Exchange Notes of any series ("Legal Defeasance"), except for:
(1) the rights of Holders of outstanding Exchange Notes of that series
to receive payments in respect of the principal of, premium, if any, and
interest on those Exchange Notes when those payments are due from the trust
referred to below;
(2) the Company's obligations with respect to the Exchange Notes of that
series concerning issuing temporary Exchange Notes, registration of
Exchange Notes, mutilated, destroyed, lost or stolen Exchange Notes and the
maintenance of an office or agency for payment and money for security
payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the Trustee and
the Company's obligations in connection with those rights, powers, trusts,
duties and immunities; and
(4) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have
its obligations released with respect to certain covenants that are contained
in the Indenture ("Covenant Defeasance") and, thereafter, any
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omission to comply with those obligations will not constitute a Default or
Event of Default. In the event Covenant Defeasance occurs, certain events --
but not including non-payment, bankruptcy, receivership, rehabilitation or
insolvency events -- described under "--Events of Default" will no longer
constitute an Event of Default.
In order to exercise either Legal Defeasance or Covenant Defeasance in
respect of any series of Exchange Notes:
(1) the Company must irrevocably deposit, or cause to be deposited, with
the Trustee, in trust, for the benefit of the Holders of that series of
Exchange Notes, cash in United States dollars, non-callable Government
Securities, or a combination of cash and non-callable Government
Securities, in those amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the outstanding series of
Exchange Notes on the stated maturity of those Exchange Notes or on the
applicable redemption date, as the case may be, and the Company must
specify whether those Exchange Notes are being defeased to maturity or to a
particular redemption date;
(2) in the case of Legal Defeasance, the Company must deliver to the
Trustee an opinion of counsel in the United States reasonably acceptable to
the Trustee confirming that the Company has received from, or there has
been published by, the Internal Revenue Service a ruling, or since the date
of the Indenture, there has been a change in the applicable federal income
tax law, in either case to the effect that, and an opinion of counsel based
on that information will confirm that, the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as
a result of the Legal Defeasance, and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have
been the case if that Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, the Company must deliver to the
Trustee an opinion of counsel in the United States reasonably acceptable to
the Trustee confirming that the Holders of the outstanding Exchange Notes
will not recognize income, gain or loss for federal income tax purposes as
a result of the Covenant Defeasance, and of those Holders will be subject
to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if that Covenant Defeasance had not
occurred;
(4) no Default or Event of Default will have occurred and be continuing
on the date of the deposit, other than a Default or Event of Default
resulting from the borrowing of funds to be applied to the deposit, or
insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date
of deposit;
(5) the Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under, any material
agreement or instrument, other than the Indenture, to which the Company or
any of its Restricted Subsidiaries is a party or by which the Company or
any of its Restricted Subsidiaries is bound;
(6) the Company must deliver to the Trustee an opinion of counsel in the
United States reasonably acceptable to the Trustee to the effect that after
the 91st day following the deposit, the trust funds will not be subject to
the effect of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights and remedies generally;
(7) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of the Exchange Notes over other creditors of the
Company, or with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others;
(8) the Company must deliver to the Trustee an opinion of counsel in
Bermuda reasonably acceptable to the Trustee to the effect that the Holders
of the outstanding Exchange Notes will not be adversely affected under
Bermuda law; and
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(9) the Company must deliver to the Trustee an Officers' Certificate and
an opinion of counsel in the United States reasonably acceptable to the
Trustee, each stating that all conditions precedent provided for or
relating to Legal Defeasance or Covenant Defeasance, as applicable, have
been complied with.
Transfer and Exchange
A Holder may transfer or exchange the Exchange Notes in accordance with the
procedures provided in the Indenture. The Registrar and the Trustee may require
a Holder, among other things, to furnish appropriate endorsements and transfer
documents, and the Company may require a Holder to pay any taxes and fees
required by law or permitted by the Indenture. The Company will not be required
to transfer or exchange any Exchange Note selected for redemption. Also, the
Company will not be required to transfer or exchange any Exchange Note for a
period of 15 days before (1) a selection of Exchange Notes to be redeemed, (2)
an interest payment date or (3) the mailing of notice of a Change of Control
Offer or Asset Sale Offer. The registered Holder of an Exchange Note will be
treated as the owner of it for all purposes under the Indenture.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Indenture or
the Exchange Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the then outstanding
Exchange Notes of any series affected by the amendment or supplement --
including consents obtained in connection with a purchase of, or tender offer
or exchange offer for, Exchange Notes -- and any existing default or compliance
with any provision of the Indenture or the Exchange Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Exchange Notes of any series affected by default or compliance --
including consents obtained in connection with a purchase of, or tender offer
or exchange offer for, Exchange Notes.
Without the consent of each Holder affected, this amendment or waiver may
not, with respect to any Exchange Notes held by a non-consenting Holder:
(1) reduce the principal amount of Exchange Notes whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal or change the fixed maturity of any Exchange
Note, or alter the redemption provisions of the Exchange Notes, other than
redemption provisions relating to the covenants described above under the
caption "--Repurchase at the Option of Holders";
(3) reduce the rate of, or change the time for, payment of interest on
any Exchange Note;
(4) waive a Default or Event of Default in the payment of principal of,
premium, if any, or interest on the Exchange Notes, except a rescission of
acceleration of the Exchange Notes by the Holders of at least a majority in
aggregate principal amount of the Exchange Notes and a waiver of the
payment default that resulted from that acceleration;
(5) make any Exchange Note payable in money other than that stated in
the Exchange Notes;
(6) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of Holders of the Exchange Notes to
receive payments of principal of, premium, if any, or interest on the
Exchange Notes;
(7) waive a redemption payment with respect to any Exchange Note, other
than a payment required by one of the covenants described above under the
caption "--Repurchase at the Option of Holders"; or
(8) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Exchange
Notes, the Company and the Trustee may amend or supplement the Indenture or the
Exchange Notes to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Exchange Notes in addition to or in place of certificated
Exchange Notes, to provide for the assumption of the Company's obligations to
Holders of Exchange Notes in the case of
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a merger or consolidation or sale of all or substantially all of the Company's
assets, to make any change that would provide any additional rights or benefits
to the Holders of Exchange Notes or that does not adversely affect the legal
rights under the Indenture of any Holder of Exchange Notes, or to comply with
the requirements of the SEC in order to effect or maintain the qualification of
the Indenture under the Trust Indenture Act.
Concerning the Trustee
The Indenture will contain certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest, it must
eliminate the conflict within 90 days, apply to the SEC for permission to
continue, or resign.
The Holders of a majority in principal amount of the then outstanding
Exchange Notes of any series will have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
Trustee regarding that series of Exchange Notes, subject to certain exceptions.
In case an Event of Default occurs which is not cured, the Trustee will be
required, in the exercise of its power, to use the degree of care of a prudent
person in the conduct of his or her own affairs. Subject to those provisions,
the Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request of any Holder of Exchange Notes, unless the
Holder of Exchange Notes will have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense.
Governing Law
The Indenture will provide that it and the Exchange Notes will be governed
by and construed in accordance with the laws of the State of New York.
The Company and the Guarantors will submit to the jurisdiction of the United
States federal and New York state courts located in the Borough of Manhattan,
City and State of New York for purposes of all legal actions and proceedings
instituted in connection with the Exchange Notes and the Indenture. The Company
has appointed CT Corporation System as its authorized agent upon which process
may be served in any such action. See "Service of Process and Enforcement of
Liabilities" on page 91.
Currency Indemnity
United States dollars are the sole currency of account and payment for all
sums payable by the Company and the Guarantors under or in connection with the
Exchange Notes, including damages. Any account received or recovered in a
currency other than dollars, whether as a result of, or the enforcement of, a
judgment or order of a court of any jurisdiction, in the liquidation,
dissolution or other winding-up of the affairs of the Company or the Guarantors
or otherwise, by any Holder of an Exchange Note in respect of any sum expressed
to be due to it from the Company or the Guarantors will only constitute a
discharge to the Company and the Guarantors to the extent of the dollar amount
which the recipient is able to purchase with the amount so received or
recovered in that other currency on the date of that receipt or recovery or, if
it is not practicable to make that purchase on that date, on the first date on
which it is practicable to do so. If that dollar amount is less than the dollar
amount expressed to be due to the recipient under any Exchange Note, the
Company and the Guarantors will indemnify it against any loss sustained by it
as a result. In any event, the Company and the Guarantors will indemnify the
recipient against the cost of making the purchase. For the purposes of this
paragraph, it will be sufficient for the Holder of an Exchange Note to certify
in a satisfactory manner, indicating the sources of information used, that it
would have suffered a loss had an actual purchase of dollars been made with the
amount so received in that other currency on the date of receipt or recovery
or, if a purchase of dollars on that date had not been practicable, on the
first date on which it would have been practicable, it being required that the
need for a change of date be certified in the manner mentioned above. These
indemnities constitute a separate and independent obligation from the Company's
and the Guarantors' other obligations, will give rise to
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a separate and independent cause of action, will apply irrespective of any
indulgence granted by any Holder of an Exchange Note and will remain in full
force and effect despite any other judgment, order, claim or proof for a
liquidated amount in respect of any sum due under any Exchange Note.
Additional Information
Anyone who receives this prospectus may obtain a copy of the Indenture and
Registration Rights Agreement, without charge, by writing to the Company at the
address provided under "Where You Can Find More Information" on page i.
Certain Definitions
Provided below are certain defined terms used in the Indenture. Reference is
made to the Indenture for a full disclosure of all those terms, as well as any
other capitalized terms used in this section for which no definition is
provided.
"Acquired Debt" means, with respect to any specified Person, (1)
Indebtedness of any other Person existing at the time that other Person is
merged with or into or became a Subsidiary of the specified Person, including
Indebtedness incurred in connection with, or in contemplation of, that other
Person merging with or into or becoming a Subsidiary of the specified Person,
and (2) Indebtedness secured by a Lien encumbering any asset acquired by the
specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling, controlled by or under direct or indirect common
control with the specified Person. For purposes of this definition, "control",
including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with", as used with respect to any Person, will mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of the Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Stock of a Person will be
deemed to be control.
"Asset Sale" means:
(1) the sale, lease, transfer, conveyance or other disposition of any
assets or rights, including by way of a sale and leaseback, other than
sales of inventory in the ordinary course of business and other than any
sale, lease, transfer, conveyance or other disposition of capacity on any
cable system owned, controlled or operated by the Company or any Restricted
Subsidiary or of telecommunications capacity or transmission rights
acquired by the Company or any Restricted Subsidiary for use in a Permitted
Business, provided that the sale, lease, transfer, conveyance or other
disposition of all or substantially all of the assets of the Company and
its Restricted Subsidiaries taken as a whole will be governed by the
provisions of the Indenture described above under the caption "--Repurchase
at the Option of Holders--Change of Control" and/or the provisions
described above under the caption "--Covenants--Merger, Consolidation or
Sale of Assets" and not by the provisions of the Asset Sale covenant; and
(2) the issue or sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of its Subsidiaries,
in the case of either clause (1) or (2), whether in a single transaction or a
series of related transactions (a) that have a fair market value in excess of
$25.0 million or (b) for net proceeds in excess of $25.0 million.
Notwithstanding the foregoing, the following items will not be deemed to be
Asset Sales: (1) a transfer of assets by the Company to a Restricted Subsidiary
or by a Restricted Subsidiary to the Company or to another Restricted
Subsidiary, (2) an issuance of Equity Interests by a Restricted Subsidiary to
the Company or to another Restricted Subsidiary, (3) a Restricted Payment that
is permitted by the covenant described above under the caption "--Covenants--
Restricted Payments", (4) a transfer of assets by the Company or a Restricted
Subsidiary in connection with a Qualified Receivables Transaction and (5) a
disposition of obsolete or worn out equipment or equipment that is no longer
useful in the conduct of a Permitted Business and that is disposed of in the
ordinary course of business.
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"Attributable Debt" in respect of a sale and leaseback transaction means, at
the time of determination, the present value discounted at the rate of interest
implicit in that transaction, determined in accordance with GAAP, of the
obligation of the lessee for net rental payments during the remaining term of
the lease included in the sale and leaseback transaction, including any period
for which the lease has been extended or may, at the option of the lessor, be
extended.
"Board of Directors" means the board of directors or other governing body of
the Company or, if the Company is owned or managed by a single entity, the
board of directors or other governing body of that entity, or, in either case,
any committee of the board of directors or other governing body duly authorized
to act on behalf of the board or governing body.
"Board Resolution" means a duly authorized resolution of the Board of
Directors.
"Capital Lease Obligation" means, at the time any determination is to be
made, the amount of the liability in respect of a capital lease that would at
that time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (1) in the case of a corporation, corporate stock, (2)
in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents, however designated, of
corporate stock, (3) in the case of a partnership or limited liability company,
partnership or membership interests, whether general or limited, and (4) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person.
"Cash Equivalents" means (1) United States dollars, (2) securities issued or
directly and fully guaranteed or insured by the United States government or any
agency or instrumentality of the United States government, provided that the
full faith and credit of the United States is pledged in support of those
securities or guarantees having maturities of not more than six months from the
date of acquisition, (3) certificates of deposit and eurodollar time deposits
with maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500 million and a Thompson Bank Watch Rating of "B" or
better, (4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified in clause (3) above, (5) commercial paper having the highest rating
obtainable from Moody's Investors Service, Inc. or Standard & Poor's
Corporation and in each case maturing within six months after the date of
acquisition and (6) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (1)-(5) of this
definition.
"Change of Control" means the occurrence of any of the following:
(1) any "person", as the term is used in Section 13(d)(3) of the
Exchange Act, other than a Permitted Holder, is or becomes the beneficial
owner, directly or indirectly, of 35% or more of the Voting Stock, measured
by voting power rather than number of shares, of the Company or GCL, and
the Permitted Holders own, in the aggregate, a lesser percentage of the
total Voting Stock, measured by voting power rather than by number of
shares, of the Company or GCL than that person and do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the board of directors of the Company or GCL; for
the purposes of this clause, the other person will be deemed to
"beneficially own" any Voting Stock of a specified corporation held by a
parent corporation if the other person beneficially owns, directly or
indirectly, more than 35% of the Voting Stock, measured by voting power
rather than by number of shares, of the parent corporation and the
Permitted Holders beneficially own, directly or indirectly, in the
aggregate a lesser percentage of Voting Stock, measured by voting power
rather than by number of shares, of the parent corporation and do not have
the right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors of the parent
corporation;
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(2) during any period of two consecutive years, Continuing Directors
cease for any reason to constitute a majority of the Board of Directors of
the Company or GCL;
(3) the Company or GCL consolidates or merges with or into any other
Person, other than a consolidation or merger (a) of the Company into GCL or
GCL into the Company, or the Company or GCL into a Restricted Subsidiary of
the Company or (b) in a transaction in which the outstanding Voting Stock
of the Company or GCL is changed into or exchanged for cash, securities or
other property with the effect that the beneficial owners of the
outstanding Voting Stock of the Company or GCL, respectively, immediately
before the transaction, beneficially own, directly or indirectly, more than
35% of the Voting Stock, measured by voting power rather than number of
shares, of the surviving corporation immediately following the transaction;
or
(4) the sale, transfer, conveyance or other disposition, other than by
way of merger or consolidation, in one or a series of related transactions,
of all or substantially all of the assets of GCL or the Company and its
Restricted Subsidiaries taken as a whole to any person other than a
Restricted Subsidiary of the Company or a Permitted Holder or a person more
than 50% of the Voting Stock, measured by voting power rather than by
number of shares, of which is owned, directly or indirectly, following the
transaction or transactions by the Permitted Holders; provided, however,
that sales, transfers, conveyances or other dispositions in the ordinary
course of business of capacity on cable systems owned, controlled or
operated by the Company or any Restricted Subsidiary or of
telecommunications capacity or transmission rights acquired by the Company
or any Restricted Subsidiary for use in its business, including, without
limitation, for sale, lease, transfer, conveyance or other disposition to
any customer of the Company or any Restricted Subsidiary will not be deemed
a disposition of assets for purposes of this clause (4).
The definition of a Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or substantially
all" of the assets of GCL or the Company and its Restricted Subsidiaries taken
as a whole, as that phrase is used in the Revised Model Business Corporation
Act. Although there is a developing body of case law interpreting the phrase
"substantially all", there is no precise established definition of that phrase
under applicable law. Accordingly, the ability of a Holder of Exchange Notes to
require the Company to purchase the Exchange Notes as a result of a sale,
lease, transfer, conveyance or other disposition of less than all of the assets
of GCL or the Company and its Restricted Subsidiaries taken as a whole to
another Person or group may be uncertain.
"Consolidated Capital Ratio" means, with respect to the Company or any of
its Restricted Subsidiaries, as of the date of any incurrence of Indebtedness
or issuance of Disqualified Stock, the ratio of (1) the aggregate consolidated
principal amount of Indebtedness outstanding and the liquidation preference of
Disqualified Stock as of the most recent quarterly or annual balance sheet
date, after giving pro forma effect to the incurrence of the Indebtedness or
the issuance of the Disqualified Stock and any other Indebtedness incurred and
Disqualified Stock issued since the balance sheet date, and the receipt and
application of the proceeds from that issuance to (2) Consolidated Net Worth as
of that balance sheet date after giving pro forma effect to the issuance of
Equity Interests, other than Disqualified Stock, issued since the balance sheet
date and the receipt and application of the proceeds from that issuance.
"Consolidated Cash Flow" means, with respect to the Company for any period,
the Consolidated Net Income of the Company and its Restricted Subsidiaries for
that period plus, to the extent that any of the following items were deducted
or added, without duplication, in computing the Consolidated Net Income:
(1) an amount equal to any extraordinary loss, less any gain, plus any
net loss, less any gain, realized in connection with any Asset Sale, plus
(2) provision for taxes based on income or profits of the Company and
its Restricted Subsidiaries for the period, plus
(3) Consolidated Interest Expense of the Company and its Restricted
Subsidiaries for the period, whether paid or accrued and whether or not
capitalized, plus
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(4) depreciation, amortization, including amortization of goodwill and
other intangibles and the amount of capacity available for sale charged to
cost of sales, but excluding amortization of prepaid cash expenses that
were paid in a prior period, and other non-cash expenses, excluding any
non-cash expense to the extent that it represents an accrual of or reserve
for cash expenses in any future period or amortization of a prepaid cash
expense that was paid in a prior period, of the Company and its Restricted
Subsidiaries for that period, minus
(5) non-cash items increasing such Consolidated Net Income for that
period, other than items that were accrued in the ordinary course of
business, plus
(6) any change in Deferred Revenue, in each case, on a consolidated
basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes on the income or
profits of, and the depreciation and amortization and other non-cash expenses
of, a Restricted Subsidiary of the Company will be added to Consolidated Net
Income to compute Consolidated Cash Flow of the Company only to the extent that
a corresponding amount would be permitted at the date of determination to be
dividended to the Company by the Restricted Subsidiary without prior
governmental approval that has not been obtained, and without direct or
indirect restriction pursuant to the terms of its charter and all agreements,
excluding agreements evidencing Indebtedness incurred in accordance with clause
(k) of the covenant described above under the caption "--Covenants--Incurrence
of Indebtedness and Issuance of Preferred Stock", to which this provision will
not apply, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Restricted Subsidiary or its
shareholders.
"Consolidated Interest Expense" for any Person means for any period the
consolidated interest expense included in a consolidated income statement,
without deduction of interest income, of that Person and its consolidated
Subsidiaries for that period, including without limitation or duplication or,
to the extent not so included, with the addition of, (1) amortization of debt
issuance costs and original issue discount, (2) non-cash interest payments, (3)
the interest component of any deferred payment obligations, (4) the interest
component of all payments associated with Capital Lease Obligations, (5)
commissions, discounts and other fees and charges incurred in respect of Letter
of Credit or bankers' acceptance financings and (6) net payments, if any,
pursuant to Hedging Obligations.
"Consolidated Leverage Ratio" means, with respect to the Company or any of
its Restricted Subsidiaries, as of the date of any incurrence of Indebtedness
or issuance of Disqualified Stock, the ratio of (1) the aggregate consolidated
principal amount of Indebtedness outstanding and the liquidation preference of
Disqualified Stock as of the most recent quarterly or annual balance sheet
date, after giving pro forma effect to the incurrence of the Indebtedness or
the issuance of the Disqualified Stock and any other Indebtedness incurred and
Disqualified Stock issued since the balance sheet date, and the receipt and
application of the proceeds from that issuance to (2) Consolidated Cash Flow
for the four full fiscal quarters ending on or prior to the date of incurrence
of the Indebtedness or issuance of the Disqualified Stock for which
consolidated financial statements are available.
"Consolidated Net Income" means, with respect to the Company for any period,
the aggregate of the net income of the Company and its Restricted Subsidiaries
for that period, on a consolidated basis, determined in accordance with GAAP,
plus, to the extent that any of the following items were deducted in computing
the Consolidated Net Income, (a) non-recurring, non-cash charges, other than
charges arising from write-downs of assets, and (b) non-cash compensation
charges arising from stock options or other similar employee benefit or
compensation plans; provided that:
(1) the net income, but not loss, of any Restricted Subsidiary that is
accounted for by the equity method of accounting will be included only to
the extent of the amount of dividends or distributions paid in cash to the
Company or a Wholly-Owned Restricted Subsidiary of the Company by that
Restricted Subsidiary;
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(2) the net income, or loss, of any Person that is not a Restricted
Subsidiary will be included only to the extent of the amount of dividends
or other distributions actually paid to the Company or a Restricted
Subsidiary by that Person during that period;
(3) for purposes of clause (c) of the covenant described above under the
caption "--Covenants --Restricted Payments", the net income of any
Restricted Subsidiary will be excluded to the extent that the declaration
or payment of dividends or similar distributions by that Restricted
Subsidiary of that net income is not at the date of determination permitted
without any prior governmental approval that has not been obtained or,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary or its
shareholders, except that the Company's equity in the net income of any
Restricted Subsidiary for that period will be included in Consolidated Net
Income up to the aggregate amount of cash that could have been distributed
by that Restricted Subsidiary during that period to the Company or another
Restricted Subsidiary as a dividend;
(4) the net income of any Person acquired in a pooling of interests
transaction for any period before the date of the acquisition will be
excluded;
(5) the equity of the Company or any Restricted Subsidiary in the net
income of any Unrestricted Subsidiary will be included in the Consolidated
Net Income up to the aggregate amount of cash actually distributed by that
Unrestricted Subsidiary during that period to the Company or a Restricted
Subsidiary as a dividend or other distribution, but not in excess of the
amount of the net income of that Unrestricted Subsidiary for that period;
and
(6) the cumulative effect of a change in accounting principles will be
excluded.
"Consolidated Net Worth" means, with respect to the Company as of any date,
without duplication, the sum of (1) the consolidated equity of the common
shareholders of the Company and its consolidated Restricted Subsidiaries as of
that date plus (2) the respective amounts reported on the Company's balance
sheet as of that date with respect to any series of preferred stock, other than
Disqualified Stock, that by its terms is not entitled to the payment of
dividends unless those dividends may be declared and paid only out of net
earnings in respect of the year of that declaration and payment, but only to
the extent of any cash received by the Company upon issuance of that preferred
stock, less (a) all write-ups, other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of that business and other
than write-ups attributable to the warrants issued under the Warrant Agreement,
dated as of January 21, 1998, as amended, after the date of the Indenture in
the book value of any asset owned by the Company or a consolidated Restricted
Subsidiary of the Company, (b) all investments as of that date in
unconsolidated Restricted Subsidiaries and in Persons that are not Restricted
Subsidiaries except, in each case, Permitted Investments, and (c) all
unamortized debt discount and expense and unamortized deferred charges as of
that date, all of the foregoing determined in accordance with GAAP.
"Consolidated Tangible Assets" means the total amount of assets, less
applicable reserves and other properly deductible items, which under generally
accepted accounting principles would be included on a consolidated balance
sheet of the Company and its Restricted Subsidiaries after deducting from the
consolidated balance sheet all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles, which in each
case under generally accepted accounting principles would be included on the
consolidated balance sheet.
"Continuing Directors" means individuals who at the beginning of the period
of determination constituted the Board of Directors of the Company or GCL, as
the case may be, together with any new directors whose election by the Board of
Directors or whose nomination for election by the shareholders of the Company
or GCL, as the case may be, was approved by a vote of at least a majority of
the directors of the Company or GCL, as the case may be, then still in office
who were either directors at the beginning of that period or whose election or
nomination for election was previously so approved or is designee of any one of
the Permitted Holders or any combination of the Permitted Holders or was
nominated or elected by the Permitted Holder(s) or any of their designees.
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"Currency Agreement" means, with respect to any Person, any foreign exchange
contract, currency swap agreement or other similar agreement as to which that
Person is a party or beneficiary.
"Debt Securities" means any bonds, notes, debentures or other similar
instruments, excluding, in any event, (1) any Capital Lease Obligations and (2)
any notes, bankers' acceptances or other instruments evidencing commercial
loans or equipment financing made by, and bills of exchange drawn on, banks,
other financial lending institutions or equipment vendors, issued by the
Company or by any Restricted Subsidiary, including by means of any Guarantee of
the Company or of any Restricted Subsidiary of securities of another Person,
whether in a public offering or private placement; provided, however, that in
no event will "Debt Securities" mean Indebtedness in the form of a bank credit
facility.
"Default" means any event that is, or with the passage of time or the giving
of notice or both would be, an Event of Default.
"Deferred Revenue" means amounts appearing as a liability on the financial
statements of the Company as prepared according to GAAP classified as deferred
revenue to the extent of cash received in connection with those amounts.
"Disqualified Stock" means any Capital Stock, other than the Company's 10
1/2% Senior Exchangeable Preferred Stock due 2008, that, by its terms, or by
the terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder of that Capital Stock,
or upon the happening of any event, matures or is mandatorily redeemable, under
a sinking fund obligation or otherwise, or redeemable at the option of the
Holder of that Capital Stock, in whole or in part, on or before the date that
is 91 days after the date on which the Exchange Notes mature; provided,
however, that any Capital Stock which would not constitute Disqualified Stock
but for provisions of that Capital Stock giving holders of that Capital Stock
the right to require the Company to repurchase or redeem the Capital Stock upon
the occurrence of a Change of Control or an Asset Sale occurring before the
final Stated Maturity of the Exchange Notes will not constitute Disqualified
Stock if the change of control and asset sale provisions applicable to the
Capital Stock are no more favorable to the holders of the Capital Stock than
the provisions applicable to the Exchange Notes contained in the covenants
described above under the caption "--Repurchase at the Option of Holders--Asset
Sales" and "--Repurchase at the Option of Holders--Change of Control",
respectively, and the Capital Stock specifically provides that the Company will
not repurchase or redeem any of the stock pursuant to those provisions before
the Company's repurchase of the Exchange Notes as are required to be
repurchased under those covenants.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock, but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock.
"Equity Offering" means an offering for cash by GCL or the Company of its
common stock, or options, warrants or rights to acquire the common stock.
"Existing Indebtedness" means Indebtedness of the Company and its Restricted
Subsidiaries, other than Indebtedness under the Credit Agreement, in existence
on the date of the Indenture, until those amounts are repaid; provided that
"Existing Indebtedness" will be deemed to include the senior subordinated notes
that may be issued, at the option of the Company, in exchange for its existing
10 1/2% Senior Exchangeable Preferred Stock due 2008.
"Frontier" means Frontier Corporation, a New York corporation.
"GAAP" means generally accepted accounting principles included in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in other statements by any other
entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
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"GCL" means Global Crossing Ltd., a Bermuda company.
"GCL Expenses" means:
(1) costs, including all professional fees and expenses, incurred by GCL
to comply with its reporting obligations under federal or state laws or
under the Indenture, including any reports filed with respect to the
Securities Act, the Exchange Act or the respective rules and regulations
promulgated under those acts;
(2) indemnification obligations of GCL owing to directors, officers,
employees or other Persons under its charter or bye-laws or under written
agreements with those Persons;
(3) fees and expenses payable by GCL in connection with the issuance of
the Notes and the Exchange Notes;
(4) other operational expenses of GCL incurred in the ordinary course of
business; and
(5) expenses incurred by GCL in connection with any public offering of
Capital Stock or Indebtedness (a) where the net proceeds of the offering
are intended to be received by or contributed or loaned to the Company or a
Restricted Subsidiary, (b) in a prorated amount of expenses in proportion
to the amount of net proceeds intended to be so received, contributed or
loaned or (c) otherwise on an interim basis before completion of the
offering so long as GCL will cause the amount of expenses to be repaid to
the Company or the relevant Restricted Subsidiary out of the proceeds of
the offering promptly if completed.
"Government Securities" means securities that are:
(1) direct obligations or certificates representing an ownership
interest in those obligations of the United States of America, including
any agency or instrumentality of the United States of America of the
payment of which the full faith and credit of the United States of America
is pledged;
(2) obligations of a Person controlled or supervised by and acting as an
agency or instrumentality of the United States of America the payment of
which is unconditionally guaranteed as a full faith and credit obligation
by the United States of America; or
(3) obligations of a Person the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America,
which, in each case, are not callable or redeemable at the issuer's option.
"Guarantee" means a guarantee, other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner, including by way of a pledge of assets or through
letters of credit or reimbursement agreements, of all or any part of any
Indebtedness.
"Guarantors" means GCL and each other person that from time to time executes
a Guarantee in accordance with the provisions of the Indenture, and their
respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the obligations of
that Person under any Interest Rate Agreement or Currency Agreement.
"Indebtedness" means, with respect to any Person, any indebtedness of that
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit, or
reimbursement agreements in respect of those, or bankers' acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any balance that constitutes an accrued expense or trade payable, if and
to the extent any of the foregoing, other than letters of credit and Hedging
Obligations, would appear as a liability upon a balance sheet of that Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of that Person, whether or not the Indebtedness is
assumed by that Person, and, to the extent not otherwise included, the
guarantee by the Person of any indebtedness of any other
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Person. The amount of any Indebtedness outstanding as of any date will be (1)
the accreted value of that Indebtedness, in the case of any Indebtedness issued
with original issue discount, and (2) the principal amount of that
Indebtedness, together with any interest on that Indebtedness that is more than
30 days past due, in the case of any other Indebtedness.
"Interest Rate Agreement" means, with respect to any Person, any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement to which that Person is a party or beneficiary.
"Investments" means, with respect to any Person, all investments by that
Person in other Persons, including Affiliates, in the forms of direct or
indirect loans -- including guarantees of Indebtedness or other obligations --
advances or capital contributions -- excluding commission, travel and similar
advances to directors, officers and employees made in the ordinary course of
business -- purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP. If the Company or any of its Restricted Subsidiaries sells or otherwise
disposes of any Equity Interests of any direct or indirect Subsidiary so that,
after giving effect to that sale or disposition, that Person is no longer a
Subsidiary of the Company or of the Restricted Subsidiary, the Company will be
deemed to have made an Investment on the date of that sale or disposition equal
to the fair market value of the Equity Interests of the Subsidiary not sold or
disposed of in an amount determined as provided in the final paragraph of the
covenant described above under the caption "--Covenants--Restricted Payments".
"Letters of Credit" means one or more irrevocable direct pay letters of
credit issued by a bank or other financial institution to support the payment
of equity obligations of the Company to its Project Subsidiaries.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of that asset, whether
or not filed, recorded or otherwise perfected under applicable law, including
any conditional sale or other title retention agreement, any lease in that
nature, any option or other agreement to sell or give a security interest in,
and any filing of or agreement to give any financing statement under the
Uniform Commercial Code or equivalent statutes of any jurisdiction.
"Management Advances" means loans or advances made to directors, officers or
employees of GCL, the Company or any Restricted Subsidiary (1) in respect of
travel, entertainment or moving-related expenses incurred in the ordinary
course of business, (2) in respect of moving-related expenses incurred in
connection with any closing or consolidation of any facility or (3) in the
ordinary course of business not exceeding $2.5 million in the aggregate at any
time outstanding.
"Net Income" means, with respect to any Person, the net income (loss) of
that Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (1) any gain, but not
loss, together with any related provision for taxes on the gain, but not loss,
realized in connection with (a) any Asset Sale, including dispositions made
pursuant to sale and leaseback transactions, or (b) the disposition of any
securities by that Person or any of its Restricted Subsidiaries or the
extinguishment of any Indebtedness of that Person or any of its Restricted
Subsidiaries and (2) any extraordinary gain or loss, together with any related
provision for taxes on that extraordinary gain or loss.
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale--including any
cash received upon the sale or other disposition of any non-cash consideration
received in any Asset Sale--net of the direct costs relating to the Asset
Sale--including legal, accounting and investment banking fees, and sales
commissions--and any relocation expenses incurred as a result of the Asset
Sale, taxes paid or payable as a result of the Asset Sale, after taking into
account any available tax credits or deductions and any tax sharing
arrangements, and any reserve for adjustment in respect of the sale price of
that asset or assets established in accordance with GAAP.
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"Non-Recourse Debt" means Indebtedness (1) as to which neither the Company
nor any Restricted Subsidiary (a) provides any guarantee or credit support of
any kind, including any undertaking, guarantee, indemnity, agreement or
instrument that would constitute Indebtedness, or (b) is directly or indirectly
liable as a guarantor or otherwise and (2) no default with respect to which,
including any rights that the holders of that Indebtedness may have to take
enforcement action against an Unrestricted Subsidiary, would permit, upon
notice, lapse of time or both, any holder of any other Indebtedness of the
Company or any Restricted Subsidiary to declare a default under the other
Indebtedness or cause the payment of the other Indebtedness to be accelerated
or payable before its Stated Maturity.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means any Co-Chairman of the Board, the President, the Chief
Executive Officer, the Chief Operating Officer, the Chief Financial Officer,
any Senior Vice President, any Vice President, the Treasurer or the Secretary
of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Pari Passu Debt Securities" means any Debt Securities of the Company or of
any Guarantor, other than GCL, which ranks pari passu in right of payment with
the Exchange Notes and any Guarantees, as applicable.
"PC-1 Subsidiaries" means Pacific Crossing Holdings Ltd., a Bermuda company,
and all of its direct and indirect Subsidiaries.
"Permitted Business" means any business that is the same as or related,
ancillary or complementary to any of the businesses of the Company or any of
its Restricted Subsidiaries on the date of the Indenture.
"Permitted Holder" means Pacific Capital Group, Inc. and CIBC World Markets
Corp., and their respective Affiliates.
"Permitted Investments" means:
(1) any Investment in the Company or in Restricted Subsidiaries of the
Company that are engaged in a Permitted Business;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Company or any of its Restricted Subsidiaries
in a Person, if as a result of that Investment (a) that Person becomes a
Restricted Subsidiary of the Company that is engaged in a Permitted
Business or (b) that Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary of the Company that
is engaged in a Permitted Business;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made under and in compliance with
the covenant included above under "--Repurchase at the Option of Holders--
Asset Sales";
(5) any acquisition of assets solely in exchange for the issuance of
Equity Interests, other than Disqualified Stock, of the Company;
(6) other Investments having an aggregate fair market value, measured on
the date each Investment was made and without giving effect to subsequent
changes in value, when taken together with all other Investments made under
this clause (6) that are at the time outstanding, not to exceed $25.0
million;
(7) any Investment made in a Receivables Entity in a Qualified
Receivables Transaction; and
(8) any investment by the Company or a Restricted Subsidiary in any
Person engaged in a Permitted Business with the Company or the Restricted
Subsidiary, provided that the investment is necessary or
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integral to the Company's or the Restricted Subsidiary's Permitted Business
and provided, further that the investment is the minimum amount reasonably
necessary for the Permitted Business and to comply with local law.
"Permitted Liens" means:
(1) Liens to secure Indebtedness, other than Pari Passu Debt Securities
or Subordinated Indebtedness, permitted to be incurred under the Indenture;
(2) Liens in favor of the Company or any Restricted Subsidiary;
(3) Liens on property of a Person existing at the time that Person is
merged with or into or consolidated with the Company or any of its
Restricted Subsidiaries; provided that those Liens were in existence before
the contemplation of the merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company or the Restricted Subsidiary;
(4) Liens on property existing at the time of acquisition of the
property by the Company or any of its Restricted Subsidiaries, provided
that those Liens were in existence before the contemplation of the
acquisition;
(5) Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(6) Liens existing on the date of the Indenture;
(7) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as will be
required in conformity with GAAP will have been made for them;
(8) Liens incurred in the ordinary course of business of the Company or
any of its Restricted Subsidiaries with respect to obligations that do not
exceed $5.0 million at any one time outstanding and that (a) are not
incurred in connection with the borrowing of money or the obtaining of
advances or credit, other than trade credit in the ordinary course of
business, and (b) do not in the aggregate materially detract from the value
of the property or materially impair the use of the property in the
operation of business by the Company or the Restricted Subsidiary;
(9) Liens with respect to assets of a Restricted Subsidiary granted by
the Restricted Subsidiary to the Company or a Restricted Subsidiary to
secure Indebtedness owing to the Company or the Restricted Subsidiary;
(10) Liens, pledges and deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of statutory obligations;
(11) Liens, pledges or deposits made to secure the performance of
tenders, bids, leases, public or statutory obligations, sureties, stays
appeals, indemnities, performance or other similar bonds and other
obligations of like nature incurred in the ordinary course of business,
exclusive of obligations for the payment of borrowed money;
(12) zoning restrictions, servitudes, easements, rights-of-way,
restrictions and other similar charges or encumbrances incurred in the
ordinary course of business which, in the aggregate, do not materially
detract from the value of the property subject thereto or materially
interfere with the ordinary conduct of the business of the Company or its
Restricted Subsidiaries;
(13) Liens arising out of judgments or awards against or other court
proceedings concerning the Company or any Restricted Subsidiary with
respect to which the Company or the Restricted Subsidiary is prosecuting an
appeal or proceeding for review and the Company or the Restricted
Subsidiary is maintaining adequate reserves in accordance with generally
accepted accounting principles; and
(14) any interest or title of a lessor in the property subject to any
lease other than a capital lease.
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"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries,
other than intercompany Indebtedness; provided that:
(1) the principal amount or accreted value, if applicable, of the
Permitted Refinancing Indebtedness does not exceed the principal amount of
or accreted value, if applicable, plus accrued interest on, the
Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded, plus the amount of reasonable expenses incurred in connection
with the extension, refinancing, renewal, replacement, defeasance or
refund;
(2) the Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the Exchange
Notes, the Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and is expressly subordinated in
right of payment to, the Exchange Notes on terms at least as favorable to
the Holders of the Exchange Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and
(4) the Indebtedness is incurred either by the Company or the Restricted
Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, incorporated or unincorporated association, joint-
stock company, trust, unincorporated organization or government or other agency
or political subdivision of government or other entity of any kind.
"Project Subsidiary" means any Subsidiary of the Company formed to develop,
own and operate undersea fiber optic telecommunications cable systems.
"Purchase Money Indebtedness" means Indebtedness, including Acquired Debt
and Capital Lease Obligations, mortgage financings and purchase money
obligations, incurred for the purpose of financing all or any part of the cost
of construction, financing, installation, acquisition, lease, development,
design, engineering, financing, testing, start-up, upgrade, completion or
improvement of any assets used or useful in a Permitted Business, including any
related notes, guarantees, collateral documents, instruments and agreements
executed in connection with those, as the same may be amended, supplemented,
modified or restated from time to time.
"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by the Company or any of its Subsidiaries
pursuant to which the Company or any of its Subsidiaries may sell, convey or
otherwise transfer to (1) a Receivables Entity, in the case of a transfer by
the Company or any of its Subsidiaries, and (2) any other Person, in the case
of a transfer by a Receivables Entity, or may grant a security interest in, any
receivables, whether now existing or arising in the future, of the Company or
any of its Subsidiaries, and any assets related to those receivables including
all collateral securing those receivables, all contracts and all guarantees or
other obligations in respect of those receivables, and the proceeds of those
receivables.
"Receivables Entity" means a Wholly-Owned Subsidiary of the Company, or
another Person in which the Company or any Subsidiary of the Company may make
an Investment and to which the Company or any Subsidiary of the Company
transfers receivables and related assets, which engages in no activities other
than in connection with the financing of receivables and which is designated by
the Board of Directors, as provided below, as a Receivables Entity, (1) no
portion of the Indebtedness or any other Obligations, contingent or
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otherwise, of which (a) is guaranteed by the Company or any Subsidiary of the
Company, excluding guarantees of Obligations, other than the principal of, and
interest on, Indebtedness, under Standard Securitization Undertakings, (b) is
recourse to or obligates the Company or any Subsidiary of the Company in any
way other than pursuant to Standard Securitization Undertakings or (c) subjects
any property or asset of the Company or any Subsidiary of the Company, directly
or indirectly, contingently or otherwise, to the satisfaction of that portion
of Indebtedness or other Obligations, other than pursuant to Standard
Securitization Undertakings, (2) with which neither the Company nor any
Subsidiary of the Company has any material contract, agreement, arrangement or
understanding other than on terms no less favorable to the Company or the
Subsidiary than those that might be obtained at the time from Persons that are
not Affiliates of the Company, other than fees payable in the ordinary course
of business in connection with servicing receivables, and (3) to which neither
the Company nor any Subsidiary of the Company has any obligation to maintain or
preserve that entity's financial condition or cause that entity to achieve
certain levels of operating results. Any designation by the Board of Directors
will be evidenced to the Trustee by filing with the Trustee a certified copy of
the resolution of the Board of Directors giving effect to the designation and
an Officers' Certificate certifying that designation complied with the
foregoing conditions.
"Related Taxes" means any taxes, charges or assessments, including, but not
limited to, sales, use, transfer, rental, ad valorem, value-added, stamp,
property, consumption, franchise, license, capital, net worth, gross receipts,
excise, occupancy, intangibles or similar taxes, charges or assessments, other
than taxes measured by income and withholding imposed on payments made by GCL
required to be paid by GCL by virtue of its being incorporated or having
Capital Stock outstanding, but not by virtue of owning stock or other equity
interests of any corporation or other entity other than the Company or any of
its Subsidiaries), or being a holding company parent of the Company of
receiving dividends from or other distributions in respect of the Capital Stock
of the Company, or having guaranteed any obligations of the Company of any
Subsidiary of the Company, or having made any payment in respect of any of the
items for which the Company is permitted to make payments to GCL under the
covenant described above under "--Covenants--Restricted Payments".
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary and, with respect to Pacific
Crossing Ltd. and all of its direct and indirect Subsidiaries (the "PC-1
Companies"), upon designation of the PC-1 Companies by the Board of Directors
as "Restricted Subsidiaries", whether or not the PC-1 Companies meet the 50%
test specified in the definition of "Subsidiary"; provided, however, that GCL
and Frontier will be Restricted Subsidiaries of the Company and provided
further, however, that the Company at its election may also designate any other
Subsidiary of GCL and any Subsidiary of Frontier as a Restricted Subsidiary.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as that Regulation is in effect on the date of
the Indenture.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by the Company or any Subsidiary of the
Company which are reasonably customary in the securitization of receivables
transactions.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which the payment of
interest or principal was scheduled to be paid in the original documentation
governing the Indebtedness, and will not include any contingent obligations to
repay, redeem or repurchase any such interest or principal before the date
originally scheduled for the payment of the interest or principal.
"Subsidiary" means, with respect to any Person, (1) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled, without regard to the
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occurrence of any contingency, to vote in the election of directors, managers
or trustees of that corporation, association or other business entity is at the
time owned or controlled, directly or indirectly, by that Person or one or more
of the other Subsidiaries of that Person or a combination of that Person and
one or more of its Subsidiaries and (2) any partnership (a) the sole general
partner or the managing general partner of which is that Person or a Subsidiary
of that Person or (b) the only general partners of which are that Person or of
one or more Subsidiaries of that Person or any combination of that Person and
one or more of its Subsidiaries.
"Unrestricted Subsidiary" means any Subsidiary of the Company that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to
a Board Resolution; but only to the extent that the Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is a Person with respect to which neither the Company nor any of its
Restricted Subsidiaries has any direct or indirect obligation to maintain
or preserve that Person's financial condition or to cause such Person to
achieve any specified levels of operating results; and
(3) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of the Company or any of its Restricted
Subsidiaries.
Any designation by the Board of Directors will be evidenced by filing
with the Trustee a certified copy of the Board Resolution giving effect to
that designation and an Officers' Certificate certifying that that
designation complied with the foregoing conditions and was permitted by the
covenant described above under the caption "--Covenants--Restricted
Payments". If, at any time, any Unrestricted Subsidiary would fail to meet
the foregoing requirements as an Unrestricted Subsidiary, it will
thereafter cease to be an Unrestricted Subsidiary for purposes of the
Indenture and any Indebtedness of that Subsidiary will be deemed to be
incurred by a Restricted Subsidiary of the Company as of that date and, if
that Indebtedness is not permitted to be incurred as of that date under the
covenant described under the caption "--Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock", the Company will be in
default of that covenant. The Board of Directors of the Company may at any
time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that that designation will be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of that Unrestricted Subsidiary and the designation will only
be permitted if (1) that Indebtedness is permitted under the covenant
described under the caption "--Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock", calculated on a pro forma basis as if the
designation had occurred at the beginning of the four-quarter reference
period, and (2) no Default or Event of Default would be in existence
following the designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of that Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (1) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years, calculated to the nearest one-twelfth, that will elapse
between that date and the making of the payment, by (2) the then outstanding
principal amount of that Indebtedness.
"Wholly-Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of that Person all of the outstanding Capital Stock or other
ownership interests of which, other than directors' qualifying shares, will at
the time be owned by that Person or by one or more Wholly-Owned Restricted
Subsidiaries of that Person and one or more Wholly-Owned Restricted
Subsidiaries of that Person.
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Book-Entry, Delivery and Form
All Exchange Notes will be represented by permanent Global Notes in fully
registered form without coupons (the "Global Notes"), which will be deposited
with the Trustee as custodian for the DTC and registered in the name of the DTC
or of a nominee of the DTC. See "Book-Entry Procedures and Settlement" on page
84.
Certificated Notes
If (1) the Company notifies the Trustee in writing that the DTC is no longer
willing or able to act as a depositary or the DTC ceases to be registered as a
clearing agency under the Exchange Act and a successor depositary is not
appointed within 90 days of that notice or cessation, (2) the Company, at its
option, notifies the Trustee in writing that it elects to cause the issuance of
Exchange Notes in definitive form under the Indenture or (3) upon the
occurrence of certain other events as provided in the Indenture, then, upon
surrender by the DTC of the Global Notes, certificated Exchange Notes will be
issued to each person that the DTC identifies as the beneficial owner of the
Exchange Notes represented by the Global Notes. Upon this issuance, the Trustee
is required to register the certificated Exchange Notes in the name of that
person or persons, or their nominee, and cause the same to be delivered to
them.
Neither the Company nor the Trustee will be liable for any delay by the DTC
or any Participant or Indirect Participant in identifying the beneficial owners
of the related Exchange Notes, and each person may conclusively rely on, and
will be protected in relying on, instructions from the DTC for all purposes,
including with respect to the registration and delivery, and the respective
principal amounts, of the Exchange Notes to be issued.
Exchange Offer; Registration Rights
On November 19, 1999, the Company, GCL and the Initial Purchasers entered
into the Registration Rights Agreement. Under the Registration Rights
Agreement, the Company agreed, for the benefit of the holders of the Restricted
Notes, that the Company will, at its cost, (1) cause to be filed, on or before
90 days after the Closing Date, the Exchange Offer Registration Statement with
the SEC under the Securities Act concerning the Exchange Offer, and (2) (a) use
its reasonable best efforts to cause the Exchange Offer Registration Statement
to be declared effective by the SEC on or before 150 days after the Closing
Date and (b) cause the Exchange Offer to remain open for the minimum period
required by applicable federal and state securities laws, provided, however,
that in no event will that period be less than 20 business days. For each
Restricted Note surrendered to the Company and accepted for exchange in the
Exchange Offer, the holder of that Restricted Note will receive an Exchange
Note having a principal amount equal to that of the surrendered Restricted
Note.
Based upon no-action letters issued by the staff of the SEC to third
parties, the Company believes that the Exchange Notes issued in the Exchange
Offer in exchange for Restricted Notes would in general be freely transferable
after the Exchange Offer without further registration under the Securities Act
if the holder of the Exchange Notes represents (1) that it is not an
"affiliate," as defined in Rule 405 under the Securities Act, of the Company,
(2) that it is acquiring the Exchange Notes in the ordinary course of its
business and (3) that it has no arrangement or understanding with any person to
participate in the distribution, within the meaning of the Securities Act, of
the Exchange Notes; provided that, in the case of broker-dealers, a prospectus
meeting the requirements of the Securities Act be delivered as required.
However, the SEC has not considered the Exchange Offer in the context of a no-
action letter and there can be no assurance that the staff of the SEC would
make a similar determination with respect to the Exchange Offer as in those
other circumstances. Holders of Restricted Notes wishing to accept the Exchange
Offer must represent to the Company that those conditions have been met. Each
broker-dealer that receives Exchange Notes for its own account in the Exchange
Offer, where it acquired the Restricted Notes exchanged for the Exchange Notes
for its own account as a result of market-making or other trading activities,
must acknowledge that it will deliver a prospectus in connection with the
resale of the Exchange Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
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A holder of Restricted Notes, other than certain specified holders, who
wishes to exchange those Restricted Notes for Exchange Notes in the Exchange
Offer will be required to represent that any Exchange Notes to be received by
it will be acquired in the ordinary course of its business, and that at the
time of the commencement of the Exchange Offer it has no arrangement or
understanding with any person to participate in the distribution, within the
meaning of the Securities Act, of the Exchange Notes and that it is not an
"affiliate" of the Company, as defined in Rule 405 under the Securities Act, or
if it is an affiliate, that it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable.
If (1) the Exchange Offer is not permitted by applicable law or SEC policy
or (2) if any Holder of Restricted Securities will notify the Company within 20
business days following the consummation of the Exchange Offer that (a) the
holder was prohibited by law or SEC policy from participating in the Exchange
Offer or (b) the holder may not resell the Exchange Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and the Prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for the resales by the holders or (c) the holder is a broker-dealer
and holds Notes acquired directly from the Company or any of its affiliates,
then the Company and the Guarantor will, at their cost, (A) use their
reasonable best efforts to cause to be filed a shelf registration statement
(the "Shelf Registration Statement") covering resales of the Restricted Notes
or the Exchange Notes, as the case may be, (B) use their reasonable best
efforts to cause the Shelf Registration Statement to be declared effective
under the Securities Act and (C) use their reasonable best efforts to keep the
Shelf Registration Statement effective until two years after its effective date
or any shorter period ending when all resales of Restricted Notes or Exchange
Notes covered by the Shelf Registration Statement have been made. A holder
selling those Restricted Notes or Exchange Notes under the Shelf Registration
Statement generally would be required to be named as a selling security holder
in the related prospectus and to deliver a prospectus to purchasers, will be
subject to certain of the civil liability provisions under the Securities Act
in connection with those sales and will be bound by the provisions of the
Registration Agreement which are applicable to that holder, including certain
indemnification obligations.
If (1) the Company and the Guarantors fail to file any of the Registration
Statements required by the Registration Rights Agreement on or before the date
specified for such filing, (2) any of the Registration Statements is not
declared effective by the SEC on or before the date specified for the
effectiveness, (3) the Company and the Guarantors fail to consummate the
Registered Exchange Offer within 180 days of the Closing Date with respect to
the Exchange Offer Registration Statement or (4) any Registration Statement
required by the Registration Rights Agreement is declared effective but
thereafter ceases to be effective or usable in connection with its intended
purpose (each event referred to in clause (1) through (4) above a "Registration
Default"), then the Company and the Guarantors will pay to each holder of the
Restricted Notes affected thereby Special Interest which will accrue and be
payable semi-annually on the Notes and the Exchange Notes, in addition to the
stated interest on the Notes and the Exchange Notes, from and including the
date the Registration Default occurs to, but excluding the date on which the
applicable Registration Statement is filed or is declared effective, the
Registered Exchange Offer is consummated, or the applicable Registration
Statement is again declare effective or made usable. During the time that
Special Interest is accruing continuously, the rate of that Special Interest
will be 0.50% per annum during the first 90-day period and shall increase by
0.25% per annum for each subsequent 90-day period, but in no event will the
rate exceed 1.0% per annum in the aggregate regardless of the number of
Registration Defaults. If, after the cure of all Registration Defaults then in
effect, there is a subsequent Registration Default, the rate of Special
Interest for the subsequent Registration Default will initially be 0.50%
regardless of the Special Interest rate in effect with respect to any prior
Registration Default a the time of the cure of that Registration Default.
The summary in this section of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which may be obtained from the Company as provided under
"Where You Can Find More Information" on page i.
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BOOK-ENTRY PROCEDURES AND SETTLEMENT
Upon issuance, all book-entry exchange notes will be represented by one or
more fully registered global notes, without coupons. Each global note will be
deposited with, or on behalf of, the DTC, a securities depositary, and will be
registered in the name of the DTC or a nominee of the DTC. The DTC will thus be
the only registered holder of the notes.
Purchasers of the exchange notes may only hold interests in the global notes
through the DTC if they are participants in the DTC system. Purchasers may also
hold interests through a securities intermediary--banks, brokerage houses and
other institutions that maintain securities accounts for customers--that has an
account with the DTC or its nominee. The DTC will maintain accounts showing the
security holdings of its participants, and these participants will in turn
maintain accounts showing the security holdings of their customers. Some of
these customers may themselves be securities intermediaries holding securities
for their customers. Thus, each beneficial owner of a book-entry exchange note
will hold that note indirectly through a hierarchy of intermediaries, with the
DTC at the "top" and the beneficial owner's own securities intermediary at the
"bottom".
The exchange notes of each beneficial owner of a book-entry exchange note
will be evidenced solely by entries on the books of the beneficial owner's
securities intermediary. The actual purchaser of exchange notes will generally
not be entitled to have the exchange notes represented by the global notes
registered in its name and will not be considered the owner under our charter
or bye-laws. In most cases, a beneficial owner will also not be able to obtain
a paper certificate evidencing the holder's ownership of exchange notes. The
book-entry system for holding securities eliminates the need for physical
movement of certificates and is the system through which most publicly traded
stock is held in the United States. However, the laws of some jurisdictions
require some purchasers of securities to take physical delivery of their
securities in definitive form. These laws may impair the ability of a
beneficial owner to transfer book-entry exchange notes.
A beneficial owner of book-entry exchange notes represented by a global note
may exchange the exchange notes for definitive (paper) exchange notes only if:
. the DTC is unwilling or unable to continue as depositary for that global
note and we do not appoint a qualified replacement for the DTC within 90
days; or
. we, in our sole discretion, decide to allow some or all book-entry notes
to be exchangeable for definitive exchange notes in registered form.
Any global note that is so exchanged will be exchanged in whole for
definitive exchange notes in registered form, with the same terms and of an
equal aggregate principal amount. Definitive exchange notes will be registered
in the name or names of the person or persons specified by the DTC in a written
instruction to the registrar of the exchange notes. The DTC may base its
written instruction upon directions that it receives from its participants.
In this prospectus, references to actions taken by holders of exchange notes
will mean actions taken by the DTC upon instructions from its participants, and
references to payments and notices of redemption to holders of exchange notes
will mean payments and notices of redemption to the DTC as the registered
holder of the exchange notes for distribution to participants in accordance
with the DTC's procedures.
The DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered under section 17A of the Exchange Act. The rules
applicable to the DTC and its participants are on file with the SEC.
The DTC's management is aware that some computer applications, systems, and
the like for processing dates that are dependent upon calendar dates, including
dates before, on, and after January 1, 2000, may encounter "Year 2000
problems". The DTC has informed its participants and other members of the
financial
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community that it has developed and is implementing a program so that its
systems, as they relate to the timely payment of distributions to shareholders,
book-entry deliveries, and settlement of trades within the DTC, continue to
function appropriately. This program includes a technical assessment and a
remediation plan, each of which is complete. Additionally, the DTC's plan
includes a testing phase, which is expected to be completed within appropriate
time frames.
We will not have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in the book-entry securities or for maintaining, supervising or
reviewing any records relating to beneficial ownership interests.
The DTC may discontinue providing its services as securities depositary at
any time by giving reasonable notice. Under those circumstances, in the event
that a successor securities depositary is not appointed, securities
certificates are required to be printed and delivered. Additionally, we may
decide to discontinue use of the system of book-entry transfers through the DTC
or any successor depositary with respect to the exchange notes. In that event,
certificates for the exchange notes will be printed and delivered.
The information in this section concerning the DTC and the DTC's book-entry
system has been obtained from sources that we believe to be reliable, but we do
not take responsibility for the accuracy of that information.
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CERTAIN INCOME TAX CONSEQUENCES
Taxation of Global Crossing Holdings
We believe that a significant portion of the income derived from our subsea
systems will not be subject to tax in Bermuda, which currently has no corporate
income tax, or other countries in which we or our affiliates conduct activities
or in which our customers are located, including the United States. However,
this belief is based upon the anticipated nature and conduct of our business,
which may change, and upon our understanding of our position under the tax laws
of the various countries in which we have assets or conduct activities, which
position is subject to review and possible challenge by taxing authorities and
to possible changes in law, which may have retroactive effect. The extent to
which certain taxing jurisdictions may require us to pay tax or to make
payments in lieu of tax cannot be determined in advance. In addition, our
operations and payments due to us may be affected by changes in taxation,
including retroactive tax claims or assessments of withholding on amounts
payable to us or other taxes assessed at the source, in excess of the taxation
we anticipate based on business contacts and practices and the current tax
regimes. We cannot assure you that these factors will not have a material
adverse effect on us.
Bermuda Tax Considerations
Under current Bermuda law, we are not subject to tax in Bermuda on income or
capital gains. Furthermore, we have obtained from the Minister of Finance of
Bermuda under the Exempted Undertakings Tax Protection Act 1966, an undertaking
that, in the event that Bermuda enacts any legislation imposing tax computed on
profits, income, any capital asset, gain or appreciation, then the imposition
of that tax will not be applicable to us or to any of our operations, neither
will that tax, or any tax in the nature of estate duty or inheritance tax,
become applicable to us or our shares, debentures or other obligations, until
March 28, 2016. This undertaking does not, however, prevent the imposition of
any tax or duty on persons ordinarily resident in Bermuda or any property tax
on any company, including ourselves, owning real property or leasehold
interests in Bermuda.
United States Federal Income Tax Considerations
We and our non-United States subsidiaries will be subject to United States
federal income tax at regular corporate rates, and to United States branch
profits tax, on our income, if any, that is effectively connected with the
conduct of a trade or business within the United States, and will be required
to file federal income tax returns reflecting that income. We intend to conduct
our operations so as to reduce the amount of our effectively connected income.
However, we cannot assure you that the Internal Revenue Service will agree with
the positions we take in this regard. Moreover, our United States subsidiaries
will be subject to United States federal income tax on their worldwide income
regardless of its source, subject to reduction by allowable foreign tax
credits, and distributions by our United States subsidiaries to us or to our
non-United States subsidiaries generally will be subject to United States
withholding tax.
Taxation of Noteholders
Bermuda Tax Considerations
Under current Bermuda law, no income, withholding or other taxes or stamp or
other duties are imposed upon the issue, transfer or sale of the exchange notes
or on any payments thereunder. See "Taxation of Global Crossing Holdings--
Bermuda Tax Considerations" above for a description of the undertaking on taxes
obtained by us from the Minister of Finance of Bermuda.
United States Federal Income Tax Considerations
The following is a summary of certain United States federal income tax
consequences for beneficial owners of exchange notes that receive their
exchange notes in connection with this exchange offer, that hold the
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exchange notes as capital assets and that are "United States persons" under the
Internal Revenue Code. Under the Internal Revenue Code, you are a "United
States person" if you are:
. a citizen or resident of the United States;
. a corporation or partnership created or organized in or under the laws
of the United States or any political subdivision of the United States;
. an estate the income of which is subject to United States federal income
taxation regardless of its source;
. a trust that is subject to the supervision of a court within the United
States and the control of one or more United States persons; or
. a trust that has a valid election in effect under applicable United
States Treasury regulations to be treated as a United States person.
This summary is based on current law, which is subject to change, perhaps
retroactively, is for general purposes only and should not be considered tax
advice. This summary does not represent a detailed description of the federal
income tax consequences to you in light of your particular circumstances. In
addition, it does not present a description of the United States federal income
tax consequences applicable to you if you are subject to special treatment
under the United States federal income tax laws, including if you are:
. a dealer in securities or currencies;
. a trader in securities if you elect to use a mark-to-market method of
accounting for your securities holdings;
. a financial institution;
. an insurance company;
. a tax-exempt organization;
. a person liable for alternative minimum tax;
. a person holding exchange notes as part of a hedging, integrated or
conversion transaction, constructive sale or straddle; or
. a United States person whose "functional currency" is not the United
States dollar.
We cannot assure you that a later change in law will not alter significantly
the tax considerations that we describe in this summary.
If a partnership holds our exchange notes, the tax treatment of a partner
will generally depend upon the status of the partner and the activities of the
partnership. If you are a partner of a partnership holding our exchange notes,
you should consult your tax advisor.
You should consult your own tax advisor concerning the particular United
States federal income tax consequences to you of the ownership and disposition
of the exchange notes, as well as the consequences to you arising under the
laws of any other taxing jurisdiction.
Consequences of the Exchange
The exchange of the outstanding notes for the exchange notes in the Exchange
Offer, see "Description of the Exchange Notes--Exchange Offer; Registration
Rights" on page 82, will not constitute a taxable event to you. Consequently,
(1) you will not realize any gain or loss upon receipt of an exchange note; (2)
the holding period of the exchange note will include the holding period of the
outstanding note exchanged for the exchange note; and (3) the adjusted tax
basis of the exchange note will be the same as the adjusted tax basis of the
outstanding note exchanged for the exchange note immediately before the
exchange.
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2009 Exchange Notes
Payment of Interest
Stated interest on a 2009 exchange note will be taxable to you as ordinary
income at the time that such interest accrues or is received, in accordance
with your regular method of accounting for United States federal income tax
purposes.
Sale, Exchange or Retirement of the 2009 Exchange Notes
When you sell, exchange or retire a 2009 exchange note, you will recognize
gain or loss equal to the difference between the amount you receive, less any
accrued interest you have not previously included in income, which will be
taxable as such, and your adjusted tax basis in the 2009 exchange note. Your
tax basis in a 2009 exchange note will generally be your cost of obtaining the
outstanding 2009 note exchanged for the 2009 exchange note. Gain or loss
realized on the sale, exchange or retirement of a 2009 exchange note will
generally be treated as capital gain or loss. Generally, capital gains of
individuals derived in respect of capital assets held for more than one year
are eligible for reduced rates of taxation. The deductibility of capital losses
is subject to limitations.
Information Reporting and Backup Withholding
In general, unless you are an exempt recipient such as a corporation,
information reporting will apply to principal and interest payments that we
make to you and to the proceeds from the sale of your 2009 exchange notes.
Backup withholding at a 31% rate will apply to such payments if you fail to
provide your taxpayer identification number or certification of foreign or
other exempt status or fail to report in full dividend and interest income.
Any amounts withheld under the backup withholding rules will be allowed as a
credit against your U.S. federal income tax liability and may entitle you to a
refund, provided that the required information is furnished to the Internal
Revenue Service.
2006 Exchange Notes
Payment of Interest
Except as provided below, interest on a 2006 exchange note will be taxable
to you as ordinary income at the time that that interest accrues or is
received, in accordance with your regular method of accounting for United
States federal income tax purposes.
Original Issue Discount
Because the outstanding 2006 notes were issued with original issue discount,
which we refer to as "OID", in an amount equal to the difference between their
stated redemption price at maturity, the sum of all payments to be made on the
outstanding 2006 notes other than "qualified stated interest", and their "issue
price", the 2006 exchange notes will be treated as having been issued with an
equivalent amount of OID. You should be aware that you generally must include
OID in gross income in advance of the receipt of cash attributable to that
income.
The "issue price" of each 2006 exchange note is equal to the issue price of
the outstanding 2006 note exchanged for the exchange note, which is $981.18 for
each $1,000 of notes held. The term "qualified stated interest" means stated
interest that is unconditionally payable in cash or in property, other than
debt instruments of the issuer, at least annually at a single fixed rate or,
subject to certain conditions, based on one or more interest indices. Interest
is payable at a single fixed rate only if the rate appropriately takes into
account the length of the interval between payments. The stated interest
payments on the 2006 exchange notes are qualified stated interest.
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The amount of OID includible in income by you, if you are the initial holder
of a 2006 exchange note, is the sum of the "daily portions" of OID with respect
to the 2006 exchange note for each day during the taxable year or portion of
the taxable year in which you held that 2006 exchange note, which we refer to
as "accrued OID". The daily portion is determined by allocating to each day in
any "accrual period" a pro rata portion of the OID allocable to that accrual
period. The "accrual period" for a 2006 exchange note may be of any length and
may vary in length over the term of the 2006 exchange note, provided that each
accrual period is no longer than one year and each scheduled payment of
principal or interest occurs on the first day or the final day of an accrual
period.
The amount of OID allocable to any accrual period is an amount equal to the
excess, if any, of (1) the product of the 2006 exchange note's adjusted issue
price at the beginning of that accrual period and its yield to maturity,
determined on the basis of compounding at the close of each accrual period and
properly adjusted for the length of the accrual period, over (2) the sum of any
qualified stated interest allocable to the accrual period. OID allocable to a
final accrual period is the difference between the amount payable at maturity,
other than a payment of qualified stated interest, and the adjusted issue price
at the beginning of the final accrual period. Special rules will apply for
calculating OID for an initial short accrual period.
The "adjusted issue price" of a 2006 exchange note at the beginning of any
accrual period is equal to its issue price increased by the accrued OID for
each prior accrual period and reduced by any payments made on such 2006
exchange note, other than qualified stated interest, on or before the first day
of the accrual period. Under these rules, you will have to include in income
increasingly greater amounts of OID in successive accrual periods. We are
required to provide information returns stating the amount of OID accrued on
2006 exchange notes held of record by persons other than corporations and other
exempt holders.
You may elect to treat all interest on any 2006 exchange note as OID and
calculate the amount includible in gross income under the constant yield method
described above. For the purposes of this election, interest includes stated
interest, acquisition discount, OID, de minimis OID and unstated interest. The
election is to be made for the taxable year in which you acquired the
outstanding 2006 note, and may not be revoked without the consent of the
Internal Revenue Service. You should consult with your own tax advisors about
this election.
Sale, Exchange or Retirement of the 2006 Exchange Notes
When you sell, exchange or retire a 2006 exchange note, you will recognize
gain or loss equal to the difference between the amount you receive, less any
accrued qualified stated interest you have not previously included in income,
which will be taxable as such, and your adjusted tax basis in the 2006 exchange
note. Your tax basis in a 2006 exchange note will, in general, be the adjusted
tax basis of the outstanding 2006 note exchanged for the exchange note
immediately before the exchange, increased by OID and reduced by any cash
payments on the 2006 exchange note other than qualified stated interest. Gain
or loss realized on the sale, exchange or retirement of a 2006 exchange note
will generally be treated as capital gain or loss. Generally, capital gains of
individuals derived in respect of capital assets held for more than one year
are eligible for reduced rates of taxation. The deductibility of capital losses
is subject to limitations.
Information Reporting and Backup Withholding
In general, unless you are an exempt recipient such as a corporation,
information reporting will apply to principal and interest, including OID,
payments that we make to you and to the proceeds from the sale of your 2006
exchange notes. Backup withholding at a 31% rate will apply to such payments if
you fail to provide your taxpayer identification number or certification of
foreign or other exempt status or fail to report in full dividend and interest
income.
Any amounts withheld under the backup withholding rules will be allowed as a
credit against your U.S. federal income tax liability and may entitle you to a
refund, provided that the required information is furnished to the Internal
Revenue Service.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account in the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of those exchange notes. This prospectus, as it may be amended
or supplemented from time to time, may be used by a broker-dealer in connection
with resales of exchange notes received in exchange for outstanding notes only
where the outstanding notes were acquired as a result of market-making
activities or other trading activities. We have agreed that we will make this
prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale for a period of 180 days from the date on
which the exchange offer is consummated, or the shorter period which will
terminate when all outstanding notes acquired by broker-dealers for their own
accounts as a result of market-making activities or other trading activities
have been exchanged for exchange notes and those exchange notes have been
resold by the broker-dealers.
We will not receive any proceeds from any sales of exchange notes by broker-
dealers. Exchange notes received by broker-dealers for their own account in the
exchange offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the exchange notes or a combination of those methods of resale, at
market prices prevailing at the time of resale, at prices related to those
prevailing market prices or at negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any broker-dealer
or the purchasers of any exchange notes. Any broker-dealer that resells
exchange notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any resale of exchange notes, and any
commissions or concessions received by any of those persons, may be deemed to
be underwriting compensation under the Securities Act. The letter of
transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
LEGAL MATTERS
Certain Bermuda legal matters with respect to the exchange notes will be
passed upon for us by Appleby, Spurling & Kempe. Certain legal matters will be
passed upon for us by Simpson Thacher & Bartlett as to matters of United States
and New York law. As of April 10, 2000, lawyers of Simpson Thacher & Bartlett
who have participated in the preparation of this document beneficially owned
less than 1% of the outstanding shares of the common stock of our parent,
Global Crossing Ltd. As of April 10, 2000, lawyers of Appleby, Spurling & Kempe
who have participated in the preparation of this document beneficially owned
less than 1% of the outstanding shares of the common stock of Global Crossing
Ltd.
EXPERTS
The consolidated financial statements of Global Crossing Ltd. and its
subsidiaries and Global Crossing Holdings Ltd. and its subsidiaries
incorporated by reference in this prospectus and elsewhere in the registration
statement have been audited by Arthur Andersen, independent public accountants,
as indicated in their reports with respect thereto, and are incorporated by
reference in reliance upon the authority of said firm as experts in giving said
reports.
The consolidated financial statements incorporated by reference in this
Registration Statement of which this prospectus is a part to the Annual Report
on Form 10-K of Frontier Corporation for the year ended December 31, 1998 and
audited historical financial statements included on pages 22-42 of Frontier
Corporation's Form 8-K dated January 26, 1999, have been so incorporated in
reliance on the reports of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The combined financial statements of Global Marine Systems incorporated by
reference in this prospectus have been incorporated by reference in reliance
upon the report of KPMG Audit Plc, chartered accountants, incorporated by
reference in this prospectus and upon the authority of said firm of experts in
accounting and auditing.
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The financial statements of Racal Telecom incorporated by reference in this
registration statement of which this prospectus is a part have been audited by
Deloitte & Touche, independent auditors, as stated in their report incorporated
by reference in this registration statement of which this prospectus is a part.
The consolidated financial statements incorporated by reference in this
registration statement of which this prospectus is a part of HCL Holdings
Limited and subsidiaries have been so incorporated in reliance on the reports
of PricewaterhouseCoopers, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
SERVICE OF PROCESS AND ENFORCEMENT OF LIABILITIES
We are organized under the laws of Bermuda. In addition, a number of our
directors and officers reside outside of the United States and a substantial
portion of our assets are located outside of the United States. As a result, it
may be difficult for you to effect service of process within the United States
upon those persons or to realize against them in courts of the United States
upon judgments of courts of the United States predicated upon civil liabilities
under the United States federal securities laws. Furthermore, our Bermuda
counsel, Appleby Spurling & Kempe, has advised us that there is doubt as to the
enforcement in Bermuda, in original actions or in actions of enforcement of
judgments of United States courts, of liabilities predicated upon United States
federal securities laws, although Bermuda courts will enforce foreign judgments
for liquidated amounts in civil matters subject to some conditions and
exceptions.
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$2,000,000,000
[LOGO OF GLOBAL CROSSING LTD.]
Offer to exchange all outstanding
$900,000,000 9 1/8% Senior Notes due 2006
for
$900,000,000 9 1/8% Senior Notes due 2006
which have been registered under the Securities Act of 1933
and
Offer to exchange all outstanding
$1,100,000,000 9 1/2% Senior Notes due 2009
for
$1,100,000,000 9 1/2% Senior Notes due 2009
which have been registered under the Securities Act of 1933
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
