Subject: View on Global Crossing
From: [email-masked]
To: [email-masked]
Cc: [email-masked]
Date: Mon, 24 Sep 2001 09:29:41 -0700 (PDT)

Here is my initial perspective.  I am still waiting for call backs on some information.

Bull Case
Best positioned among emerging backbone carriers
Core network build done
Cash EBITDA positive (adjusted for IRU sales)
Broad network coverage
Reasonable liquidity: $2.6B forecast YE01
Potential upside $21

Bear Case:
Extreme capacity supply/demand imbalance
Pricing pressure, no apparent elasticity
Low visibility in IRU and dark fiber sales business (28% revenue)
$9B debt & pref
Hard to make a constructive case on demand in intermediate term
Potential issue with cash movement between Parent and Subs, covenant test
Seems fairly valued on peer group risk-adjusted basis, absolute fair value $6

Conclusion:
Debt yielding 23%, why would you buy equity?
Probability of recap: 50%
Chance of survival without restructuring: 25%

If a proposed deal involved some cash exchange for equity upside I would be hard pressed to recommend that transaction.
I don't understand all the dynamics of a deal so if you want me to do any more in-depth work let me know.  I will pass on the additional information as I get it.

Regards,
Patrick