In deal designed to keep XO Communications out of bankruptcy, ven...
In deal designed to keep XO Communications out of bankruptcy, venture capital firm Forstmann, Little and Telefonos de Mexico reached preliminary agreement to infuse broadband communications provider with $800 million in cash. Deal, already approved by XO’s board, will…
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result in Forstmann, Little and Telmex each owning 39% of XO and reduce its total debt to about $1 billion. Senior note holders of XO will hold remaining 22% of company, except for stakes held by employees. “Consequently, current holders of the company’s equity securities are expected to lose substantially all of the value of their investment as a result of the restructuring,” XO said. It said preliminary agreement provided for completion of final agreement on or before Dec. 14. Stakes of $400 million each that Forstmann, Little and Telmex are taking is contingent on XO’s successfully restructuring its balance sheet and regulatory approvals. XO said that at end of 3rd quarter it had more than $1 billion in cash or cash equivalents on hand, which would let it continue business operations during restructuring. Company’s shares fell 22% to 80 cents before trading was halted at midmorning on Nasdaq. XO also said that under terms of new investment and as part of its financial restructuring, it would not make scheduled interest and dividend payments on its unsecured notes or preferred equity securities after Nov. 30. “The investment will allow us to build upon our solid foundation with a strengthened balanced sheet, significantly reduced debt and a fully funded business plan,” XO Chmn.-CEO Daniel Akerson said.