Asia Global Crossing announced today vendor financing agreements with both of its major construction vendors, KDDI-SCS and NEC. These agreements will reduce related payments for capital expenditure by approximately $230 million this year.
KDDI-SCS and NEC are each constructing segments of Asia Global Crossing’s pan-Asian East Asia Crossing subsea cable system, and the vendor financing agreements that have been renegotiated are related to this system.
Under the terms of the original agreement with KDDI-SCS, Asia Global Crossing would have paid KDDI-SCS approximately $95 million this year. The revised agreement allows Asia Global Crossing to limit the principal payments to KDDI-SCS in 2002 to $45 million.
Under the terms of the original NEC agreement, Asia Global Crossing was scheduled to pay NEC approximately $240 million this year. The new agreement with NEC instead spreads the payments out until 2005. Total principal payments to NEC will be limited to $80 million in 2002, which, as part of the agreement, includes a $50 million refund by Asia Global Crossing of amounts previously paid by NEC for capacity to be activated in future periods.
The negotiated agreements grant both KDDI-SCS and NEC security in the East Asia Crossing cable system. In addition, Asia Global Crossing agreed to guarantee the amounts its subsidiary East Asia Crossing Ltd. owes to NEC.
“Successful renegotiation of these vendor financing agreements was integral to our restructuring process and we are extremely pleased that we have achieved this target. This allows us to retain approximately $230 million in cash this year that we were previously expecting to spend, thereby dramatically reducing the amount of outside capital we must raise to successfully restructure the company and continue operations into 2003 and beyond,” said Jack Scanlon, Asia Global Crossing vice chairman and acting chief executive officer.
Scanlon also stated that Asia Global Crossing is engaged in active discussions with potential investors with respect to a potential capital infusion.