June 17, 2002 XO Communications Said to Plan Bankruptcy Filing By ANDREW ROSS SORKIN
XO Communications, the telecommunications service provider, is expected to file for bankruptcy protection today and present a reorganization plan that will probably raise questions among its creditors, according to executives close to the company.
XO, based in Reston, Va., is pursuing a reorganization plan that tries to force the financier Theodore J. Forstmann and Teléfonos de México to stand by an agreement they made in January to invest $800 million collectively in the company, the executives said. In recent statements, Mr. Forstmann and Telmex have said that they have the right to end the deal.
These executives said that XO was also planning to announce an alternative reorganization plan, a backup in the event that the deal with Mr. Forstmann and Telmex proves unenforceable. The alternative plan calls for about $1.5 billion in loans to be converted into stock, with the possibility that the company issue common stock through a $250 million rights offering to XO's senior unsecured creditors, the executives said.
XO's options were limited several weeks ago when the financier Carl C. Icahn rescinded a restructuring proposal because he could not reach an agreement with XO's creditors. Indeed, some analysts had questioned whether Mr. Icahn's proposal was simply a strategy to force Mr. Forstmann and Telmex to raise their offer.
Instead of raising their offer, Forstmann and Telmex told XO last week that they planned to abandon the deal entirely, citing provisions in the agreement that allow them to back out if certain conditions are not met. They argued that they were allowed to walk away if, among other things, XO's business materially changed, if they were uncomfortable with unresolved litigation or if the bankruptcy plan was unacceptable.
Mr. Forstmann and Telmex told XO's lawyers last week that they thought it would be "virtually impossible" for those conditions to be met.
Moreover, Mr. Forstmann and Telmex cited a provision that allowed them to back out if the reorganization is not completed by Sept. 15, which would mean the deal would have to close in record time.
Still, XO insisted in a statement last week: "We do not believe that the investors have any right to terminate their obligations unilaterally, and see no reason to believe that the closing conditions cannot be satisfied."
The company added: "We flatly reject the investors' notion that it is `virtually impossible' for the conditions to the investors' obligations to be fulfilled."
Mr. Forstmann's leveraged buyout firm, Forstmann Little, has already invested $1.5 billion in XO and had been a supporter of Dan Akerson, XO's chairman and chief executive. But in a December memorandum to his investors, Mr. Forstmann acknowledged that, "Obviously, with the benefit of hindsight, we clearly invested in XO too early and at too high a price."
Mr. Forstmann's plan to recapitalize the company was intended to protect his earlier investment, though many Wall Street analysts questioned the investment. He told his investors, "By eliminating all this excessive debt and getting to an appropriate capital structure, we believe that the value of this company can be improved to the point that will at least allow us to get even on our total investment."
It remains unclear if the Forstmann-Telmexdeal is unenforceable or whether XO's alternative plan will work. It requires lenders, which the company thinks also support the alternative restructuring, to agree formally to the deal, a process that so far has been quite cantankerous.
XO, founded by the mobile-phone pioneer Craig O. McCaw, piled up more than $5.1 billion in debt building a telecommunications network in the 1990's. As a result, Mr. Akerson has said, the debt payments have simply overwhelmed the company's income. He said he thinks the company's debt problems, not operational problems, are to blame for the company's predicament.
This weekend, a spokesman for Mr. Forstmann declined to comment. Officials at XO did not return messages, while Telmex could not be reached for comment.
(edited by dunkndollaz on 17.6.02 0943) Stylin' and Profilin' - Custom Made from Head to Toe.....courtesy of Michael's of Kansas City
Yep, it's happened. There's a conference call scheduled for this afternoon, presumably to attempt to prevent widespread employee panic. I've been expecting this since November, though, so it's not like it's a SHOCK or anything.
Mean Gene: "You know, I don't think it's a question - Goldberg, I don't think it's a question of who's next, I think it's a question of who's left?" Goldberg: "No, see, that's where you're wrong. It ain't who's left, it's - WHO'S NEXT?"
"Just how hardcore am I? Well this morning, I drank milk that was two days past the expiration!" -Norman Smiley
My co-worker's son worked on replacing the (huge) natural gas lines that run along the bridge. I'll have to see if I can find those pics. He said just the scale of that job, nevermind the whole bridge, was mind boggling.