Carl Icahn's High River Limited Partnership has offered to buy all of XO Communications' outstanding senior secured bank debt at a price of 50, according to a memo obtained by LMW. The new offer is at a price 20 cents lower than Icahn's last offer, but Icahn is now offering to buy all of the bank debt instead of just one-third of it, which is what he had been after. As first reported last week on LMW's Web site, the deadline for the new offer is 5 p.m. tomorrow. Icahn could not be reached by press time.
For months Icahn has been trying to snap up XO's bank debt to strengthen his position and influence in the company's restructuring. Market players said there is little ambiguity in Icahn's offer, and investors are expected to take him up on the offer. "Finally, for the first time, it's very clear," one trader said, noting that the offer came without any strings attached. In his previous offers, Icahn was looking for things ranging from XO board seats to the scrapping of an amendment blocking trades to him. The trader said Icahn's offer price compares favorably with the bank debt of other CLECs like McLeodUSA and Allegiance Telecom, which are quoted in the low 50s and mid-30s, respectively.
The senior secured lender's steering committee, including TD Securities, Bank of America, Barclays, J.P. Morgan, Deutsche Bank, FleetBoston Financial andScotia Capital, supports the transaction in principal. But to ensure that all lenders will be able to participate in the offer, the committee has decided on a few conditions of its own. High River must hold the offer open until the aforementioned deadline and must purchase all the debt tendered by an Aug. 29 settlement date. Officials at TD Securities declined to comment, and a spokeswoman did not return call by press time. Officials at all other banks could not be reached, and spokespeople did not return calls.
This latest offer comes after High River's extended and revised tender for $331 million of XO's bank debt expired on Wednesday, Aug. 21. High River reportedly had tendered at least $145 million before this latest offer. That amount, together with the $170 million that High River already owned, brought its total holdings to at least 31% of XO's $1 billion in bank debt.
A bankruptcy court hearing, where XO Communications expects to seek confirmation of its plan of reorganization, is scheduled for today. A spokeswoman for XO declined to comment on Icahn's offer but said the hearing is still set for today. She added that the company is looking to go forward with a plan calling for an $800 million injection by Forstmann Little and Telefonos de Mexico.
