PHILADELPHIA, United States—XO Communications announced it is fighting bankruptcy by accepting an US$800 million investment that will put Mexican telecommunications company Telefonos de Mexico and buyout firm Forstmann Little at its reins.
XO said if the restructuring is completed it will erase about US$4.7 billion of its US$5.7 billion debt, leaving bondholders with about a 22-percent stake of the company and current stockholders with nothing, however it will help the company skirt bankruptcy. “From an existing investor standpoint, the proposed restructuring is devastating to value. … The common and preferred equity holders will essentially get zero, while the bondholders will get only pennies on the dollar,” said Morgan Stanley analysts, while cautioning XO could still be forced into bankruptcy.
