XO Holdings isn’t ‘holding’ up so well these days. Yesterday the CLEC reported a first-quarter loss of $42.9 million – more than the $20.6 million in losses a year earlier. Ongoing losses, combined with the hiring of an investment bank, make XO look ripe for one of three actions: going private; getting bought by a rival; or filing bankruptcy.

I say that for three reasons.

First, companies don’t hire investment banks unless they need to change something about their business model. XO contracted Morgan Stanley as its “financial advisor” in February.

Second, XO’s stock prices keep dropping – today they’re at 55 cents; yesterday they hit 60 cents. The company has been trading on the Over The Counter Bulletin Board – a place where stocks pretty much go to die – since 2003 (I earlier had written since last October but I had my facts wrong).

Finally, XO is carrying a high debt load and it doesn’t look like refinancing will happen any time soon in this credit-crunched market. The debt comes due in April and July of next year.

On the whole, I’m surprised Carl Icahn has let matters get this bad at XO. Maybe he’s been too focused on cleaning up Motorola. Meanwhile, XO plans to spend another $22 million on capex in 2008. If XO doesn’t spend that money, it fears “it would be difficult to continue to compete against the ever increasing pressures from the regional Bell operating companies.” That’s from its earnings info yesterday.

I’m curious to know what telecom and XO insiders think of the situation. I hear morale at the company is, understandably, in the dumps. (Update: An insider tells me morale actually is high, so I'm getting conflicting information) E-mail me with your thoughts; if I write an article, I’ll keep your name and company confidential.