HUGE XOXOQ NEWS Dow Jones Business News
Icahn Raises His XO Holdings to Participate in Restructuring
Thursday August 29, 2:11 am ET
By Kara Scannell, Staff Reporter of The Wall Street Journal
Billionaire financier Carl Icahn said he increased his holdings of XO Communications Inc.'s bank debt to 94%, giving him a powerful voice in XO's bankruptcy-court proceedings and assuring him a substantial ownership stake in the restructured telecommunications carrier.
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Mr. Icahn, who already owns XO bonds with a face value of $750 million, launched a tender offer to acquire XO's senior secured loans in July. Wednesday, Mr. Icahn said he had agreements to acquire $947 million of the $1 billion face value in bank debt for a total of $500 million.
XO "has an excellent fiber network," said Mr. Icahn. "I obviously believe it is going to be one of the survivors." XO is a Reston, Va., provider of Internet and phone service to small businesses.
The development comes two days after XO won bankruptcy-court approval for a restructuring plan that requires Telefonos de Mexico SA and XO's largest investor, Forstmann Little & Co., to invest a total of $800 million for an 80% stake in the firm.
Theodore J. Forstmann, co-founder of the New York leveraged-buyout firm, already has $1.5 billion invested in XO. But after proposing the restructuring plan, Forstmann and Telmex now are trying to terminate it, citing deteriorating conditions throughout the telecom industry. XO filed for bankruptcy protection in June.
Unlike many telecom carriers that have entered bankruptcy proceedings, the prospects for XO's fiber network sparked a heated battle between Mr. Forstmann and Mr. Icahn.
Mr. Icahn, who launched a counter restructuring plan to Mr. Forstmann's, abandoned that offer for control of XO in May after being unable to reach an agreement with the banks.
But as conditions throughout the telecom industry worsened, bank holders became more willing to unload their debt, especially as the likelihood that the Forstmann-led plan, which was generous to the banks, wouldn't close.
Mr. Icahn, a corporate cage-rattler, stands to double his investment if the Forstmann-led plan goes through. Under that plan, holders of bank debt would be paid cash for the $1 billion in bank debt. Mr. Icahn has voted in favor of the Forstmann-led plan.
If the Forstmann-Telmex plan doesn't go through, under a backup plan that is still being negotiated, Mr. Icahn would emerge as the controlling shareholder of XO, with about a 95% equity stake in the restructured company. Bondholders would get the remaining 5% in XO equity plus some warrants.
Write to Kara Scannell at kara.scannell@wsj.com
