Forstman nibbling on XOXO? - from NY TIMES: good move and timing on xoxoxoxoxo ed.
April 18, 2001
Forstmann Considers More Help for XO
By GERALDINE FABRIKANT
Forstmann Little & Company, a private
equity firm, is mulling making an
investment of several hundred million
additional dollars in XO Communications,
according to an executive close to the
discussions.
Forstmann Little has already invested $1.2
billion in XO, a cash- short company controlled by the billionaire Craig O. McCaw.
And last week, Theodore J. Forstmann, senior founding partner at Forstmann Little,
bought 200,000 shares of XO stock at $8.85, a premium to recent prices, for a
total of $1.77 million.
XO is also considering scaling back its capital spending by as much as $500 million
to help close a gap that is estimated at $2.5 billion. Spokesmen for Forstmann Little
and XO declined to comment yesterday.
If Forstmann Little proceeds with its investment, it could buoy the ailing XO stock,
which closed yesterday at $2.86 a share, after reaching a high of $66 on March 24,
2000.
XO began as Nextlink Communications, a developer of fiber optic networks that
provide phone and data services to business customers. It subsequently acquired
some radio spectrum that the government auctioned off for new wireless services
and it bought an Internet-access company and changed its name to XO
Communications.
Investors have been nervously waiting for a strategy that would help replenish the
corporate coffers. And even though Mr. McCaw, along with his partners, is the
company's largest shareholder with 22 percent of the stock and voting control,
analysts have not expected him to make a significant enough capital infusion to
reduce the gap.
"Forstmann Little's exhibiting its support for XO would be a big endorsement of the
company's business model, and help to reassure bondholders," said Aryeh
Bourkoff, a debt analyst at UBS Warburg. "But the company still has certain
challenges because a funding gap still remains, and leverage is still high."
Thomas Morabito, an equity analyst at McDonald Investments in Cleveland, said
that financing was the main concern about XO's future among investors.
"Hands down, that is the concern with the stock," Mr. Morabito said. "You are
seeing a lot of less players dropping by the wayside. Forstmann Little's support
would be great." |
