XO Falls on Downgrade, Concerns About Debt Load
NEW YORK (Reuters) - Shares of XO Communications Inc. (NasdaqNM:XOXO - news) fell 44 percent on Tuesday after an analyst downgraded the stock and concerns lingered about the emerging telecommunications company's debt load, analysts said.
Shares of XO, formerly known as NEXTLINK/Concentric, lost $2-1/4 to close at $2-31/32 on Nasdaq.
The stock has fallen about 91 percent over the past year amid a broad sell-off in technology and telecommunications stocks, particularly among emerging carriers.
UBS Warburg analyst Glen Waldorf on Tuesday assumed coverage of XO, cutting the stock's rating to hold from strong buy and setting a $9 price target.
XO is an ``ambitious international CLEC with strong management with rapid cash burn and debt load that represent significant risks,'' Waldorf said in a research report.
As of Dec. 30, 2000, XO had about $6.2 billion in debt and redeemable preferred stock, and a $1 billion credit facility, according to a filing with the Securities and Exchange Commission (news - web sites). It estimated it needs $430.0 million to pay cash interest and dividend obligations in 2001 on its debt and preferred stock.
XO said it has enough funding to carry it into the first half of 2002. It may have to seek additional funding later.
XO's operations ``do not currently, and are not expected in the near future to, generate cash flows'' to make interest payments on outstanding notes, make dividend payments on preferred stock or fund continuing operations and planned capital expenditures, XO said in the SEC filing.
``For each period since inception, we have incurred substantial and increasing net losses and negative cash flow from operations,'' XO said.
``It has a significant amount of debt, and with a low stock price and tighter capital markets it's hard to see how they will get additional funding. They still have about $3 billion in funding needs. How do you get that money in this market?'' said Chris Martinelli, senior telecommunications analyst with CIBC World Markets Corp.
XO in 2000 posted a net loss attributable to common stockholders of about $1.2 billion million and showed negative cash flows from operations of about $559.4 million. It expects that losses and negative cash flow from operations will continue over the next several years. |
