7/22/02
XO Restructuring Plan Achieves Several Important Milestones at Court Hearing
Solicitation of creditor approval of plan of reorganization to begin shortly - Both alternatives under XO's plan of reorganization now have support of key XO creditor groups - August 26 date set for confirmation of Forstmann Little/Telmex Plan
Reston, VA - XO Communications, Inc. (OTCBB:XOXOE) announced today that the Official Committee of Unsecured Creditors representing XO's bondholders has agreed with representatives of XO's banks to support both branches of XO's two-pronged plan of reorganization. As a result, XO is revising the "stand-alone" contingency plan included in its plan of reorganization so that bondholders and other creditors would now expect to recover more of their investment in XO, primarily through their receipt of stock and warrants in the reorganized Company. These revisions and the support of these two key creditor groups set the stage for a successful reorganization and restructuring of XO's balance sheet..
XO's plan of reorganization includes two alternative restructuring scenarios, the first of which seeks to implement the previously-announced investment agreement with Forstmann Little and Telmex, and the second of which would implement the stand-alone contingency plan, if required. The Company has developed this contingency plan in light of the expressed reluctance of Forstmann Little and Telmex to close the transactions under the investment agreement and the possibility that one or more of the conditions to closing will not be met. The Company expects the stand-alone plan to be available if the Company's existing deal with Forstmann Little and Telmex fails to close as scheduled, although the Company has not entered into any written agreements with respect to its contingency plan..
At a July 19 hearing, the U.S. Bankruptcy Court for the Southern District of New York indicated that it would shortly approve XO's Disclosure Statement, permitting solicitation of its creditors to obtain the approvals needed to implement the restructuring. The solicitation process is expected to begin next week. At the hearing, the Bankruptcy Court also established August 26th as the date for the hearing at which XO expects to seek confirmation of the Forstmann Little/Telmex plan.
At the July 19 hearing, XO also confirmed that it would revise the terms of the stand-alone restructuring plan to include increased recoveries for XO Bondholders and general unsecured creditors. Under the revised stand-alone restructuring plan, so long as the plan garners sufficient bondholder support, XO's bondholders and general unsecured creditors would collectively receive, among other consideration:
- Five percent of the initial common equity in reorganized XO
- Three series of warrants exercisable over a seven year period including:
- warrants to purchase up to ten percent of the common equity of the reorganized company at an exercise price equal to 125 percent of the reorganized company's implied equity value in the stand-alone restructuring;
- warrants to purchase up to 7 ½ percent of the common equity of the reorganized company at an exercise price equal to 150 percent of the implied equity value;
- warrants to purchase up to 7 ½ percent of the common equity of the reorganized company at an exercise price equal to 200 percent of the implied equity value;
- First rights to participate in the company's offering of rights to purchase up to $200 million of the reorganized company's common stock.
XO also announced that it has passed two important milestones in its efforts to satisfy the conditions to the transactions under the Forstmann Little / Telmex investment agreement. First, at the July 19 hearing, the Bankruptcy Court approved the "break-up" fee and expense reimbursement provisions that were a condition to the investors' obligations to proceed.
Second, in order to satisfy an additional condition to the Forstmann Little/Telmex investment concerning litigation, XO has agreed to settle all of the fiduciary duty class action cases pending against it. To avoid any cost to XO, Forstmann Little or Telmex if the Forstmann/Telmex investment closes, the revised plan provides that XO's banks will fund the settlement in that event. The settlement is subject to bankruptcy and state court approvals.
About XO Communications
XO Communications is one of the nation's fastest growing providers of broadband communications services offering a complete set of communications services, including: local and long distance voice, Internet access, Virtual Private Networking (VPN), Ethernet, Wavelength, Web Hosting and Integrated voice and data services...
XO has assembled an unrivaled set of facilities-based broadband networks and Tier One Internet peering relationships in the United States. XO currently offers facilities-based broadband communications services in 65 markets throughout the United States.
For more information contact:
Todd Wolfenbarger / XO Communications
Media and Industry Analysts
703-547-2011 or 703-675-3496
Lisa Miles / XO Communications
Financial Analysts
703-547-2440