Source: Daily Deal
 
Phoenix-based Pivotal Private Equity has made a $63 million stalking horse bid for the assets of bankrupt telecom Pacific Crossing Ltd., the companies announced Monday.
 
The firm has signed a letter of agreement to purchase PCL's assets subject to approval by the U.S. Bankruptcy Court for the District of Delaware.
Chief among the assets is the PC-1 fiber-optic network that connects Japan and the U.S. The 12,500-mile-long network was completed in 2000 and cost more than $1.35 billion to construct.
 
Judge Peter Walsh plans to hold a sale procedure hearing April 30. Bids are due by May 16, with an auction scheduled for May 21. A sale hearing is slated for May 28.
 
PCL's board and a steering committee of its bank group, which holds about 90% of the company's debt, have approved the bid. Deutsche Bank is the administering agent of the bank loan.
 
PCL, a former subsidiary of Global Crossing Ltd., filed for bankruptcy protection in July 2002.
 
"Good luck to them. They are getting a pretty good deal," said Seth Libby of The Yankee Group, cautioning that the investors are entering a tough market. Another competitor with deep pockets, Level 3 Communications, exited the Asian undersea market in late 2001.
 
"There's a lot of competition," Libby said. "There's excess capacity in the terrestrial market. I think it's even more of a problem in sub-sea."
Pivotal CEO Jahm Najafi handled the negotiations for the firm. Frank Placenti and Robert Miller of Bryan Cave LLP represented Pivotal, which did not retain financial advisers.
 
Chris Davino and Roopesh Shah of Miller Buckfire Lewis & Co. were financial advisers to PCL.
 
Debra Grassgreen and Rick Gruber at Pachulski, Stang, Ziehl Young Jones & Weintraub PC are bankruptcy counsel for PCL. Martin Stern of Preston Gates & Ellis LLP handled regulatory matters. Carl Steen of Morrison and Foerster LLP was counsel for commercial matters and European and Japanese legal issues.
 
Sandy Qusba and Bob White of O'Melveny & Myers LLP represented the bank group.
 
Pivotal is a wholly owned subsidiary of Pivotal Group, a real estate investment firm that has purchased resorts throughout the western U.S. The firm recently formed the private equity arm to branch out in other areas and to invest in "under-valued strategic assets in volatile markets," according its Web site.
 
Pivotal says that PC-1 has been underutilized, and that it aims to provide voice and Internet services to other telecoms.
 
This is the firm's first major foray into the telecommunications industry, and the company is looking to make more investments in the future.
 
"We're looking for telecom services and infrastructure. We're not looking at software or equipment," said Najafi, who explained that Pivotal is targeting energy as well as telecom. "Both of those industries are undervalued."
 
"Geographically we don't have a preference in general, though I would the closer they are to us the better," he said, adding that the firm is looking for transactions of less than $100 million.
 
The deal will need approval from the Federal Communications Commission, if it passes the bankruptcy court, and is expected to close by the end of the year.