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President Bush on Friday approved Singapore Technologies Telemedia Pte. Ltd.’s controversial $250 million acquisition of bankrupt fiber-optic network provider Global Crossing Ltd. In a letter to House and Senate officials, Bush said he would “take no action to suspend or prohibit the proposed 61.5 percent investment by Singapore Technologies Telemedia” in Global Crossing. The transaction had been in doubt after undergoing an extended review by the Committee on Foreign Investments in the United States. The White House had until Friday to rule on the merger, based on a review timeline set by CFIUS. By allowing the transaction to proceed, Bush has effectively opened the door for Global Crossing to exit Chapter 11, ending its 20-month long stay in bankruptcy protection. “With today’s approval and the achievements of Global Crossing’s thousands of employees, we’ve set the stage to become a dominant force in the next phase of telecommunications’ evolution,” said CEO John Legere in a press release. An ST Telemedia spokeswoman said the company was “gratified that this important step in the approval process has concluded, and we look forward to the remaining portions of the regulatory review being completed in the near future.” To emerge from bankruptcy, Global Crossing needs little more than to line up approval from the Federal Communications Commission and to get its exit financing in place. “We look forward to getting this deal done in short order,” said Russ Belinsky of Chanin Capital Partners, the financial adviser to the official committee of unsecured Global Crossing creditors. He suggested that Global Crossing, which had recently been faced with unsolicited takeover attempts by XO Communications Inc. and other companies, could become a consolidator with the backing of ST Telemedia. “They’ll have the capital. They’ve got the bandwidth. They’ve got the management team,” he said. “I think all of the pieces are in place.” CFIUS, a multi-agency panel that reviews any deal that might pose a national security risk to the U.S., completed its own 45-day review of the deal and passed on an undisclosed recommendation to the White House on Sept. 5. The review of the deal has been plagued by some of the most heated controversy concerning national security and a transaction, largely because ST Telemedia is 100 percent controlled by the Singapore government and has purported links to China. Sources said that CFIUS representatives from the Department of Defense and the Department of Homeland Security were divided until the very end over whether the acquisition raises enough national security risks to warrant a rejection. But they added that National Security Adviser Condoleezza Rice was able to persuade disparate factions of the review body to compromise and send the president a generally unified recommendation to approve the deal. Bush’s clearance of the deal reflects the importance of a new strategic military and economic alliance with Singapore, sources said. The president also appreciates Singapore’s early verbal support for the Iraqi war. The Defense Department, another CFIUS member, argues that successful completion of this deal is necessary to foster a new national defense strategy, critical for U.S. foreign policy in the post-Sept. 11 environment, sources said. A key defense strategy is to create regional hubs around the world to tackle terrorism. That argument, combined with pressure from other panel members on economic issues, appears to have tipped the scale in favor of deal approval. An important argument came from the Commerce Department and the Office of the U.S. Trade Representative, two other CFIUS members, which insist that the deal is vital to international trade. The USTR recently brokered the U.S.-Singapore free-trade pact. Rejection of the merger would harm that agreement, sources said. Still, some officials had worried that foreign control of Global Crossing’s vast fiber-optic network raised the risk of wiretapping U.S. government secrets. Global Crossing has contracts with government agencies, including Defense, to carry telecom traffic. Foreign nationals, possibly terrorists, could also shut down the complex international network during a national emergency, raising security concerns in the U.S., a source said. Key U.S. officials now have priority access to telecommunications systems during national emergencies. To assuage U.S. government concerns, ST Telemedia has pledged that more than half of Global Crossing’s board would be prominent American citizens, including citizens with ties to the U.S. defense establishment. The merging parties also agreed to other concessions, including keeping important records in the U.S. and giving American employees access to networks. Defense Department officials declined to comment. White House, Homeland Security, Commerce and Treasury department representatives did not return calls. Global Crossing’s path through bankruptcy has been arduous. The company filed for Chapter 11 protection in January 2002, listing $22.4 billion in assets and $12.4 billion in liabilities and unveiling an agreement to sell a 79 percent stake in the reorganized company to Hutchison Whampoa Ltd. and ST Telemedia for $750 million. But the parties failed to reach an agreement with Global’s creditors, and the company had to launch a new search for a buyer. Global Crossing extended the deadline for bids three times during the late spring and summer, before announcing a second, and much smaller, deal with Hutch-Sing in August 2002. In the new transaction, the two companies agreed to pay $250 million for a 61.5 percent stake. While a reorganization plan built around the agreement won creditor approval and court confirmation in December, the deal stalled before CFIUS, because of concerns among some members of the government panel about the sale of important network assets to a company based in China. In late April 2003, Hutchison Whampoa exercised an out-clause in the sale agreement. ST Telemedia assumed Hutch’s obligations and its equity stake, and the parties re-submitted the deal to CFIUS. With the uncertain regulatory outlook regarding the deal, companies such as IDT Corp. and XO Communications publicly expressed interest in acquiring Global Crossing. Court testimony revealed that others, including Level 3 Communications Inc., WilTel Communications Group Inc. and Cerberus Capital Management, also reached out to the company or its creditors. XO presented the most substantial challenge to the ST Telemedia deal, offering a total of $700 million to its creditors. The Carl Icahn-controlled company also battled Global Crossing’s efforts to extend the period in which it alone can file a reorganization plan, though a judge granted the company exclusivity until late October. Copyright �2003 TDD, LLC. All rights reserved.

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