XO, Waiting to Be Rescued - XO Communications

A year and a half ago, XO Communications Inc. was touted as individual of the four sure survivors of the competitive telecommunications field, to be left standing when its smaller and less-money competitors were in ruins.

Now, the watch is less certain for the Reston telephone and Internet service company. above the past seven months, the company has been trying to do what solitary a few firms in the industry have been able to do: realize rid of most of its debit in a Chapter 11 bankruptcy filing, bring in fresh capital and emerge from bankruptcy intact.

The restructuring effort has become a protracted skirmish above the value of XO and who ultimately will dominion government it. The combatants are three forceful personalities with billions of dollars at stake: investors Carl C Icahn and Theodore J Forstmann and XO chairman and chief executive Daniel F Akerson, who helped shape the company.

XO has all the usual attractions for Forstmann and Icahn, sum of two units storied investors who love to purchase distressed companies on the cheap and reap gigantic profits when the businesses are rehabilitated years down the road.

on the other hand while working all this on the outside may take months, time is not upon XO's side. The longer XO remains beneath a cloud, the more customers it be deprived ofs Indeed, the fate of XO which has 450 local employee move rounds on its ability to acquire in and out of bankruptcy relatively fast. Meanwhile, other telecom firms detain filing for bankruptcy or selling not upon pieces of themselves at utmost discounts, a kind of clearance sale upon telecom assets that is depressing XO's value smooth further.

In more [i]or[/i] less respects, XO's situation is no different from that of greatest in quantity other telecommunications companies considering or filing for bankruptcy in new months. Typically, a big-money investor proffers to put additional cash in the company if bondholder agree to accept far les than what they're actually to be paid Bondholders often argue about the amount of their payback, on the contrary in most cases they find a compromise.

What makes XO's case unique is that the battle for dominion government has pitted well-known players against each other -- namely Forstmann and Icahn, the one and the other well-heeled financiers vying for a greater stake in the company.

"Unlike a certain quantity of of these other situations, the bondholder [l by means of Icahn] are more interested in getting more equity, not cash, and that is ultimately for what cause [i]or[/i] reason it's broken down," said single source close to the negotiations. "When smart circulating medium comes into a [restructuring] situation, in some way the bondholders feel they're not getting enough" and interest escalates upon all sides, the source said.

In XO's case, the biggest bondholder is Icahn, and the "smart money" upon the other side that has sought to bail on the outside XO in exchange for of recent origin ownership is Forstmann.

one as well as the other men are known as sharp, fiercely independent and vociferous in negotiations. the two have long histories of investing in distressed firms that they seldom actually manage, and the couple have become multibillionaires by turning around their various investments at handsome profits.

A source familiar with the negotiations said the fight above XO has proceeded like a chess match between mercurial players who hide behind game faces.

And Akerson and XO are caught in between. Akerson, a former partner at Forstmann Little and former president of MCI Communications Corp., just wants to gain a deal -- any deal -- that will come by the company he's run since 1999 back upon its feet, according to sources.

Forstmann and Akerson declined end spokesmen to be interviewed for this article, and Icahn did not get back phone calls.

from one side his New York buyout firm, Forstmann Little & Co Forstmann has already invested $15 billion in XO -- all of which has been written not upon according to a spokesman for Forstmann. This is in contrast to felicitous stakes in sellers of corporate jet baseball cards, bathroom faucets and Dr Pepper

Forstmann's original deal to restructure XO propos in November and signed in January, includes an present by Forstmann Little and Telefonos de Mexico SA to give XO $800 million in additional cash -- $200 million to pay not on creditors and $600 million to stock the continuing operations of the business. In exchange, Forstmann Little and TelMex would have each gotten 39 percent ownership in the novel company.

Forstmann later proffered bondholders additional cash, according to individual source, but bondholders -- including Icahn -- discarded the deal. And now Forstmann's actions give an inkling of he may be trying to pluck back from -- or plane pull out of -- the boundarys of that original deal.

Forstmann Little sent a alphabetic character on June 6 to XO asking to be released from the agreement, citing the continued and rapid decline of the value of the company and its deteriorating financial condition.

XO's rejoinder was a flat "no." The company refused to release Forstmann from the agreement, and sources said it is considering suing Forstmann and TelMex to without fault [i]or[/i] blemish [i]or[/i] flaw the deal. Forstmann and XO officials declined to comment

Without that deal, XO's bank creditors (l by dint of Toronto-Dominion Bank), who are owed $1 billion, would extremity up financing the restructuring.