Competitive telecom provider XO Communications, long rumored to be on the verge of bankruptcy, filed for Chapter 11 protection today. The provider does not expect the filing to affect any of its customers.
XO hopes to use the Chapter 11 process to restructure its operations and emerge as essentially the same company, but debt-free.
It is not clear, however, how XO will restructure. The company submitted two alternative restructuring plans in its Chapter 11 filing.
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The first plan would see investment firm Forstmann Little and telecom company Telefonos de Mexico invest $800 million in XO in return for each getting a 39% stake in the provider. Bondholders would get $200 million.
This restructuring may not go through though, because Forstmann Little and Telmex are balking at some conditions of the agreement. They say that since some conditions of the deal have not been met the deal should be terminated.
XO though, believes all conditions of the deal have been met and that it should go ahead.
If the Forstmann/Telefonos deal falls through, XO hopes to convert $1 billion in loans into common equity and $500 million in secured debt to keep the company going.
XO listed liabilities of $8.5 billion and assets of $8.7 billion in its filing.
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