Global Crossing is in talks with lenders to relax the covenants on its $6 billion of debt. The Bermuda-based telecommunications company said late on Tuesday that it was not yet in breach of its lending provisions but that it would fail to meet them as revenues continued to fall.

News of the talks came as Global Crossing announced an after-tax loss of $3.4billion on reported revenues of $792m in the third quarter. The loss included write-downs of $2.6billion on investments. (See story below).

Global Crossing also warned of further pressure on revenues in the fourth quarter of this year and in 2002. Based on those numbers, the company will breach a bank covenant dealing with the ratio of debt to earnings before interest, tax, depreciation and amortisation (EBITDA), said Dan Cohrs, chief financial officer. It may also breach a second covenant covering the ratio of EBITDA to interest costs..

Talks with the company's lead bankers, JP Morgan Chase and Citigroup, could take several weeks, the executives added.

John Legere, who was brought in as chief executive officer early last month as the company warned of a big shortfall in third-quarter revenues, saying the forecasts for next year demonstrated that the company would be able to break even in terms of operating cash flow, even using conservative assumptions.

In the fourth quarter, the company said its cash revenue (a measure which is widely followed by investors and analysts) would fall to $825 million to $850 million compared with cash revenues of $999m in the third quarter. It would also see a loss of $150-175m in recurring adjusted EBITDA, compared with a loss of $16m in the third quarter.

Next year, Global Crossing said that sales of wholesale capacity under agreements known as IRUs would fall to $1billion, less than half what analysts had expected until recently, though its other service revenues would grow by ten percent.

To cope with the decline, the company said it would cut another 1,200 jobs, or 13 percent of its total staff, and reduce operating costs next year by $500 million. It would also slash capital spending from under $4.2billion this year to $1billion-1.25bn in 2002.

These moves would allow it to break even on an operating cash flow basis without any IRU deals at all next year, Mr. Legere said. With $2.4 billion in cash at the end of the third quarter and an imminent disposal likely for one of the two businesses it has put up for sale, this would ensure the company had adequate cash..

The write-downs announced on Tuesday include a $545 million reduction in the carrying value of Global Marine, one of the businesses it is seeking to sell, as well as a $2.1 billion charge from a previously disclosed write-down in web hosting company Exodus, as well as other investments.