XO Communications Inc. disclosed Monday the company will pursue a standalone reorganization plan to emerge from bankruptcy after reaching an agreement to kill an $800 million investment deal with Forstmann Little and Telefonos de Mexico, S.A. de C.V.
Under the settlement terms, which are subject to bankruptcy court approval, Forstmann Little and TELMEX each will pay XO $12.5 million and all parties will release any claims related to the investment agreement.
All parties involved in the investment agreement, including plaintiffs in certain shareholder actions and billionaire investor Carl C. Icahn, who owns more than 85 percent of the company’s senior secured debt and more than $1.33 billion of the face value of senior notes through affiliates, support the settlement agreement, according to XO.
Earlier this year lawyers representing Forstmann Little and TELMEX cited the decline in value of XO among other factors as grounds for it being “virtually impossible” to satisfy the purchase agreement.
Under a standalone reorganization plan XO would convert $1 billion in loans into common equity and $500 million of junior secured debt. A hearing date for approval of the settlement agreement with Forstmann Little and TELMEX and confirmation of the standalone reorganization plan is scheduled for mid-November.
Meanwhile, XO says it continues to provide services to more than 100,000 business customers. The company reported cash and cash equivalents of more than $500 million as of Sept. 30.
