Telecommunications firm XO says bankruptcy is imminent

Posted 5:52PM on Friday 29th March 2002 ( 22 years ago )

RESTON, Va. - Struggling telecommunications firm XO Communications warned in its annual report Friday that it will likely file for bankruptcy as part of a restructuring plan. The announcement comes as little surprise: The company lost $2.1 billion in 2001, and the Nasdaq market suspended trading in November. The company had already warned investors that its stock would likely be worthless. It now trades over the counter at 8 cents a share. The bankruptcy filing, which the company said "could be commenced in the very near future," would allow it to get out from billions of dollars in debt. It would also allow the company to complete a deal with Forstmann Little Investors and Telmex, Mexico's dominant telecommunications company. Under the deal, which is contingent on a bankruptcy restructuring, the two companies would each invest $400 million in XO in return for an 80 percent stake in the company. Forstmann Little had already invested $1.5 billion in XO. The Forstmann deal is opposed, though, by bondholders who believe that giving an 80 percent stake in the company in those two investors would leave too little for them. Financier and corporate raider Carl Icahn, who holds millions of dollars in unsecured bonds in XO, made a competing offer last week, offering $500 million for a 50 percent stake. The company said it is still analyzing Icahn's offer. XO blamed the general downturn in the telecommunications industry for its woes. The annual report also indicates that four of the five top executives in the company received bonuses averaging $222,736, on top of annual salaries averaging $290,000. Daniel F. Akerson, the company's chief executive officer, opted not to take a bonus. It's not clear how the bankruptcy will affect the company's 6,700 employees, although the company says in its report that it does not expect employees or customers to be adversely affected by bankruptcy proceedings. Calls to the company were not returned Friday.

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