The Transaction

On August 9, 2002, the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court) authorized GCL to enter into a purchase agreement to effectuate certain Investment Proposals and Qualified Investment Proposals (Proposed Transaction).¹⁰ In furtherance of the Proposed Transaction, GCL would transfer substantially all its assets, including its interests in the California-licensed subsidiaries, to New GX. Upon consummation of the Proposed Transaction, GCL would relinquish all of its equity and voting power in New GX. New GX would become the new parent of the California-licensed subsidiaries.

Under the Proposed Transaction, Hutchison Telecom and ST Telemedia would invest $125 million cash in New GX. In return, Hutchison Telecom and ST Telemedia, respectively, would obtain common and preferred stock equal to 30.75% of the equity and voting power of New GX. Creditors of GCL and its debtor subsidiaries would be issued New GX common stock in an aggregate amount of up to 38.5% of New GX's equity and voting power, as well as $200 million in senior secured notes of New GX and $300 million in cash. On December 26, 2002, the Bankruptcy Court issued a Confirmation Order accepting the Debtors' Joint Plan of Reorganization.¹¹

Applicants contend that the Proposed Transaction is in the public interest because it will enhance transmission capacity and wholesale telecommunications services in California by strengthening the financial position of the California-licensed subsidiaries and enabling them to emerge from bankruptcy as stronger and more viable competitors. In addition, the Proposed Transaction is not expected to affect the day-to-day operations of the California-licensed subsidiaries and will be transparent to their customers.