XO Gets $800 Million

However, the new investors will get 78 percent of the company, and allow XO to default on its unsecured debt.

by Roy Mark of www.internetnews.com [December 3, 2001]

Telfonos de Mexico S.A. de C.V. (TELMEX), Mexico's largest telecommunications company, and investment firm Forstmann Little have agreed to invest $400 million each in broadband carrier XO Communications, Inc. (NASDAQ:XOXO) in exchange for new equity in the company. The investment is contingent on XO successfully completing a restructuring of its existing balance sheet and upon completion of regulatory approvals.

XO Communications was formed in September, 2000, by the merger of NEXTLINK and Concentric.

Following the close of the investment and the balance sheet restructuring, Forstmann Little and TELMEX will each own 39 percent of the company's outstanding equity. The remaining equity, other than that allocated to the company's employees, is expected to be held primarily by holders of the company's senior notes. 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 also announced today that as required by the terms of the new investment and as a part of the financial restructuring it will not make scheduled interest and dividend payments on its unsecured notes or preferred equity securities after Nov. 30.

The restructuring is expected to require the completion of transactions with holders of XO senior notes and lending institutions under XO's secured credit facility, resulting in XO having total debt outstanding of no more than $1 billion of senior secured debt in addition to its existing capital lease obligations.

At the end of the third quarter the Reston, Va.-based XO had more than $1 billion of cash or cash equivalents, which will allow the company to continue its business operations, without interruption, during the financial restructuring.

Proceeds of the investment will be used to fund the continued development of XO's broadband telecommunications networks, on-going business operations and to complete the balance sheet restructuring. Once the investment and restructuring are complete, XO is expected to have a fully funded business plan.

"XO has been widely recognized as one of the best operating companies in the emerging telecommunications sector and we believe this equity infusion will secure the company's future," said Dan Akerson, chairman and chief executive officer of XO. "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 has built a fiber and wireless broadband communications network serving 63 metro markets throughout the United States. These markets are connected by XO's IP backbone network. The company offers a wide range of services including local and long distance voice, Internet access, virtual private networking (VPN), ethernet, wavelength, Web hosting and integrated voice and data services.

The company is also one of North America's largest holders of fixed broadband wireless spectrum, with licenses covering 95 percent of the population of the 30 largest U.S. cities.

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