Icahn Makes New Bid for XO Communications

Byline: Yuki Noguchi

Billionaire financier Carl C. Icahn announced today he has offered to spend $331 million to acquire the bank debt of bankrupt telecommunications firm XO Communications Inc., in what appears to be another attempt to take control over the company.

Icahn, who already held more than $750 million of $5.1 billion in XO bonds prior to the most recent purchase, is offering to pay 40 percent of the value of the bank loans, to acquire anywhere from half to the entire amount of the bank credit of $1 billion, according to a source close to Icahn.

Officials at XO, which filed for Chapter 11 bankruptcy protection last month, declined to comment on the Icahn offer.

Icahn, who is has made the offer through his affiliate, High River Limited Partnership, had made an attempt earlier this year to gain control of XO. In March, Icahn offered $550 million in cash for about 55 percent ownership of a restructured XO -- an offer that was rejected by the bank creditors in May.

Icahn has long been at odds with XO's bank creditors, a group led by Toronto-Dominion Bank. The banks earlier tried to block Icahn from being able to acquire a substantial portion of the bank debt by passing an amendment that would make it difficult for the debt to change hands, but the banks have since backed away from implementing that restriction, according to sources.

If bank creditors accept Icahn's most recent offer, Icahn could end up with control over the company's future, and with that position, Icahn would consider offering an alternative to XO's existing restructuring plans, according to the source.

Currently, XO is pursuing two restructuring plans. One, proposed by its existing investor, Forstmann Little & Co., and Telefonos de Mexico S.A., which would give the company $800 million in new cash -- $200 million to pay off bondholders, and $600 million to fund the business. The backup plan would fund the company through its bank creditors. Icahn and other bondholders have opposed the Forstmann/TelMex plan, citing that it does not sufficiently compensate bondholders.

"Basically, Carl made a large play in the bonds, and is hugely under water on those, and has been trying to accumulate with the bank debt to maintain" a strong position within the company, said a distressed telecommunications analyst close to XO who wished to remain anonymous.

COPYRIGHT 2002 Washingtonpost Newsweek Interactive
COPYRIGHT 2003 Gale Group