By JASON BOOTH
It has been quite a year for Global Crossing Ltd., the telecommunications venture created by Beverly Hills investment banker Gary Winnick.
At the end of this week the firm will launch a road show to promote its $400 million initial public stock offering. It recently finished building a high-capacity fiber-optic link between the United States and United Kingdom and raised $800 million through a private note offering.
Not bad for a company only 16 months old.
And according to the company's filings with the Securities and Exchange Commission, this year's achievements are only a precursor to what Global Crossing is planning over the next two years. The U.S.-U.K. link is the first leg of a 31,000-mile fiber-optic network running beneath the Atlantic, Caribbean and Pacific oceans.
"In the last year and a half Winnick has created a company with more than a billion dollars in capitalization," said Ron Silverman, a nameplate partner at Beverly Hills law firm Weissmann, Wolf, Bergman, Coleman & Silverman, who has worked with Winnick on a number of his earlier deals, including his major investment in the Playa Vista real estate development near Marina del Rey.
"He has also changed the paradigm of the telecommunications industry by being the first entrepreneur to create a network using private money without the participation of the major carriers."
While Global Crossing is a relatively new enterprise, Winnick and his investment firm Pacific Capital Group had been looking into the telecommunications industry for a number of years, said Brian McCarthy, a partner at law firm Skadden Arps Slate Meagher & Flomm, who also participated in earlier deals with Winnick.
"But what is unique about Winnick is that he looked beyond a single project and saw the prospects on a much broader scale much earlier than anyone else. He gave it scope and vision," said McCarthy.
Global Crossing is raising vast amounts of money and spending even more to build its network. Profits, however, remain well over the horizon.
"This is a build-first, return-later type of business, said David Cooperstein at Forrester Research Inc. in Cambridge, Mass.
What Global Crossing has already achieved is pre-sold contracts to customers who want to lease space on the Atlantic line. As of April 21, those binding agreements with customers such as Deutsche Telekom, Swisscom and PTT Telecom BV were worth more than $400 million, according to SEC filings. In addition, the company has secured non-binding commitments worth another $175 million-plus.
Winnick, as well as employees and investors of Global Crossing, declined to be interviewed last week, citing the "quiet period" imposed ahead of an IPO.
However, analysts who cover the telecommunications industry said Global Crossing is entering a lucrative business and that its public offering should enjoy a warm reception on Wall Street.
"Absolutely they will be well received," said Kevin Moore, analyst at BT Alex Brown Inc. in Baltimore. "The (fiber-optic) market may be crowded in terms of the number of companies out there, but in terms of the aggregate value of the networks deployed the market is still under-penetrated."
Analysts said that with growing Internet usage and corporate demand for voice, data and video communications, Global Crossing's fiber-optic cables should find plenty of customers.
"There is growing demand for bandwidth across both the Atlantic and the Pacific," said Eric Struminger at PaineWebber in New York.
Global Crossing's plan is to manage the network from its technical headquarters in Bermuda and lease out space on the network to telecommunications firms and Internet providers.
The Street's confidence in this deal is evidenced by the list of blue-chip brokerage houses that have joined the syndicate to underwrite the IPO.
Salomon Smith Barney is underwriting the deal, along with a syndicate that includes Merrill Lynch & Co., CIBC Oppenheimer, Morgan Stanley Dean Witter, Deutsche Bank Securities and Goldman Sachs & Co.
The IPO is relatively small in terms of dollar value. But Global Crossing is expected to go back to the market in the future to finance its ambitious plans.
While the $750 million U.S.-U.K. link has already been financed, the company still needs to raise capital for its lines across the floors of the Caribbean and Pacific oceans, which will cost an estimated $1.9 billion, according to SEC statements. And Global Crossing said that in the future it may lay additional cables to meet growing customer demands.
"This is only the first of a lot of public filings," said Silverman.
Global Crossing Ltd. is a holding company incorporated in Bermuda, where it will enjoy lower income and capital-gains tax rates. The network control hub also will be based in Bermuda as will its sales and marketing force.
The administrative operations of the company, including Winnick and most of the firm's top executives, will be based in Beverly Hills.
Winnick is a longtime player in the Los Angeles financial community. Back in the early 1980s he was a senior executive with Michael Milken's bond operations at Drexel Burnham Lambert.
In 1985 he founded Pacific Asset Management, and in 1990 formed Pacific Capital Group to acquire and merge companies. Pacific Capital has a 22.4 percent equity stake in Global Crossing, as well as an option to acquire a one-third stake in the Playa Vista project.
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