Allegiance agrees to $57.4 mil payment
Bloomberg NewsPublished: 10/24/2008 2:18 PMSend To:
XO Holdings Inc., the Internet company partly controlled by financier Carl Icahn, will get $57.4 million under a settlement with a trust created from the bankruptcy of Allegiance Telecom Inc.
Lawyers for the trust said in court documents filed yesterday that, if U.S. Bankruptcy Judge Robert Drain in New York approves the settlement, it will pay XO $57.4 million plus interest within four days, ending a dispute that has been in court since 2004. The amount is a ``net settlement payment'' that includes distribution payments for Allegiance notes that XO owns, minus a $2.9 settlement payment related to the XO litigation.
The settlement ``completely expunges the more than $65 million, including interest, claimed by XO'' and ``resolves a litany of disputes,'' lawyers for the trust wrote. It also provides for a gross payment by XO to the trust of $3 million, before offsets related to administrative expense claims.
The court documents didn't say how much the interest payment would be or explain all the counterclaims contributing to the $57.4 million. Allegiance had delayed paying $27.5 million to XO for unsecured notes that XO held as the two parties debated in bankruptcy court counterclaims the trust might have against XO.
The settlement ends an adversary lawsuit in bankruptcy court and calls for the number of directors on Allegiance's board to be reduced to two from three. Robert Fischer, a current director, ``shall be deemed to have resigned'' from the board, and XO won't have a right to designate a board member as was previously allowed, according to court documents.
``We're obviously pleased with the settlement,'' Abid Qureshi, a lawyer for Allegiance, said in a phone interview. ``This litigation has been going on for years.''
The dispute dates back to the 2004 resolution of Allegiance's bankruptcy. The two parties have fought over the terms of a $311 million sale of Allegiance assets to XO Holdings when Allegiance exited bankruptcy court protection that year. The reorganization had called for creditors, including holders of $650 million in notes, to be repaid.
The case is In re Allegiance Telecom, 03-13057, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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