XO Lists Two Restructuring Plans in Bankruptcy Filing

XO Communications Inc. finally has done what analysts expected for months. The Reston, Va.-based carrier filed a voluntary Chapter 11 bankruptcy petition, listing two separate alternatives as a means to restructure its debt.

It is uncertain if one restructuring plan remains valid. In January Forstmann Little & Co. and Telefonos de Mexico S.A. de C.V. signed a definitive agreement to invest $400 million each in XO for a combined 78 percent equity stake.

But lawyers representing the proposed financiers recently cited the decline in the value of XO among other factors as grounds for it being "virtually impossible" to satisfy the current purchase agreement.

XO has rejected that claim, explaining the company does not "believe that the investors have any right to terminate their obligations unilaterally and see no reason to believe that the closing conditions cannot be satisfied."

A second alternative includes a stand-alone plan that would convert $1 billion in loans under its secured credit facility into common equity and $500 million of junior secured debt. Under the plan, XO noted it also might issue common equity through a $250 million rights offering to senior unsecured creditors.

XO said it does not expect any workforce reductions or closing of facilities as a result of the bankruptcy filing. Neither does the company expect the filing to affect its subsidiaries' "relationships with customers and vendors."

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