Sep, 2001 : Global Crossing Summarizes Relationship With Exodus
📅 - Global Crossing Ltd., a provider of integrated telecommunications solutions, released a statement Tuesday summarizing its relationships with the now-bankrupt Exodus Communications, Inc., showing confidence in the fate of the Web hosting giant.
Global Crossing owns approximately 108 million common shares, or 19 percent,of Exodus. In the second quarter of 2001, Global Crossing announced that itwas evaluating the carrying value of its equity investment in Exodus. Thecompany expects to reflect the revaluation of the carrying value of itsinvestment in Exodus as a non-cash charge in its third quarter 2001statement of operations.
According to Morgan Stanley, Global Crossing may be stuck with annual leasepayments of $70 million if Exodus cannot make its payments. "It would amountto $800 million over the course of the lease," CBS Marketwatch was told."But Global Crossing would try to reduce that immediately by subletting thespace."
Global Crossing, together with its subsidiary Asia Global Crossing, was alsothe primary supplier of network services to Exodus, with a ten-year contractto provide at least 50% of Exodus's incremental network services outsideAsia, and at least 60% in Asia. This contract specifies that the supplierrelationship would continue in the event of a change of control of Exodus,although the agreement is terminable two years after any acquisition ofExodus by a network provider.
Global Crossing offers Web hosting and managed hosting services to itscustomers through a re-sale agreement with Exodus, but said that its dataservice revenue has not been materially affected by this arrangement. In theevent that Exodus were unable to offer these services, Global Crossing couldprovide the services itself or through another supplier. Global Crossingexpects the primary driver of growth in its data services to be demand forglobal IP services, such as global IP virtual private networks and voiceover IP, for which its owned and controlled network is uniquely capable.
In connection with the sale of its GlobalCenter subsidiary to Exodus, GlobalCrossing agreed to guarantee certain obligations relating to real estateleases assumed by Exodus in that transaction. As previously reported inGlobal Crossing's 10Q report for the second quarter of 2001, on anaggregated basis, the annual lease payments average approximately $70million per year over the life of the leases. In the opinion of management,in the event that Global Crossing is required to satisfy some or all of theguaranteed lease commitments, annual payments would be significantly reducedto an amount that is not material through negotiated termination of theguarantees, discounted landlord buyouts, permitted sub-leases, and othermitigating actions, and, in any event, the satisfaction of these leasecommitments would not have a material effect on the company's financialcondition. The remaining lease terms are between approximately 5 and 18years.
Global Crossing shares fell 9 percent to $2.69 in Tuesday trades.
Global Crossing owns approximately 108 million common shares, or 19 percent,of Exodus. In the second quarter of 2001, Global Crossing announced that itwas evaluating the carrying value of its equity investment in Exodus. Thecompany expects to reflect the revaluation of the carrying value of itsinvestment in Exodus as a non-cash charge in its third quarter 2001statement of operations.
According to Morgan Stanley, Global Crossing may be stuck with annual leasepayments of $70 million if Exodus cannot make its payments. "It would amountto $800 million over the course of the lease," CBS Marketwatch was told."But Global Crossing would try to reduce that immediately by subletting thespace."
Global Crossing, together with its subsidiary Asia Global Crossing, was alsothe primary supplier of network services to Exodus, with a ten-year contractto provide at least 50% of Exodus's incremental network services outsideAsia, and at least 60% in Asia. This contract specifies that the supplierrelationship would continue in the event of a change of control of Exodus,although the agreement is terminable two years after any acquisition ofExodus by a network provider.
Global Crossing offers Web hosting and managed hosting services to itscustomers through a re-sale agreement with Exodus, but said that its dataservice revenue has not been materially affected by this arrangement. In theevent that Exodus were unable to offer these services, Global Crossing couldprovide the services itself or through another supplier. Global Crossingexpects the primary driver of growth in its data services to be demand forglobal IP services, such as global IP virtual private networks and voiceover IP, for which its owned and controlled network is uniquely capable.
In connection with the sale of its GlobalCenter subsidiary to Exodus, GlobalCrossing agreed to guarantee certain obligations relating to real estateleases assumed by Exodus in that transaction. As previously reported inGlobal Crossing's 10Q report for the second quarter of 2001, on anaggregated basis, the annual lease payments average approximately $70million per year over the life of the leases. In the opinion of management,in the event that Global Crossing is required to satisfy some or all of theguaranteed lease commitments, annual payments would be significantly reducedto an amount that is not material through negotiated termination of theguarantees, discounted landlord buyouts, permitted sub-leases, and othermitigating actions, and, in any event, the satisfaction of these leasecommitments would not have a material effect on the company's financialcondition. The remaining lease terms are between approximately 5 and 18years.
Global Crossing shares fell 9 percent to $2.69 in Tuesday trades.
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