DJ XO Commun Dn -2: Winstar Woes Helped Start SelloffC
17 Apr 16:08
By John Seward
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--XO Communications Inc. (XOXO) shares hit a 52-week low
Tuesday as investors continued to fret over the highly leveraged company's
future.
Funding worries have haunted the entire sector of late, and news late Monday
that Winstar Communications Inc. (WCII) is considering filing for Chapter 11
bankruptcy may have helped start the selloff.
XO's obvious alternatives for raising capital aren't encouraging, said Glenn
Waldorf, UBS Warburg analyst. He calculates that the company faces a $2.5
billion funding gap between next year and 2006, when it expects its cash flow
to turn positive.
Vendors are unlikely to offer much in the way of financing, while debt
markets are also nervous. Equity holders could see their stake severely eroded
if XO tried to make up the gap through selling more shares at depressed prices.
Waldorf downgraded XO Communications to hold last month. He speculated that
its best hope may lie with its financial sponsors, Craig McCaw and Forstmann
Little, who presumably have an interest in protecting their original
investments.
Potential actions might include acquiring part of the company's debt or
making an additional equity investment, Waldorf speculated.
XO spokesman Todd Wolfenbarger reiterated earlier company statements that its
available capital is adequate through the first half of 2002 at its current
burn rate.
Wolfenbarger added that XO believes there may be opportunities to extend its
available funding by cutting costs, and to acquire additional capital.
"We're very well aware of the issue investors have," Wolfenbarger said. "We
expect to address them and to address them very quickly."
XO shares fell to $2.40 Tuesday before ending regular trade at $2.86, down 47
cents, or 14%, on volume of 20.4 million. Average daily volume is 8.9 million
shares.
The previous 52-week low of $2.69 was set April 4.
(MORE) DOW JONES NEWS 04-17-01
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