Carl Icahn is in the market for XO Communications bank debt, making a direct appeal in a letter to investors in the credit and pushing levels up 6-7 points. Market players said Icahn has sent a letter to XO bank debt holders rather than work through Wall Street trading desks in search of a bank position. Approximately $25 million was believed to have changed hands as high as 52, although the amount that Icahn bought could not be determined. The debt had been trading in the 46-47 range. Icahn's office declined to provide a copy of the letter sent to investors.
Icahn recently pulled his bid for a 55% stake in the company and a $550 million cash injection after negotiations with bank holder seeking controlling covenants came to a halt. Jenna Deer, a spokeswoman for XO, said that Icahn had withdrawn his bid because of the strict bank covenants but could not confirm that he was accumulating a bank debt position.
Traders notes that Icahn either sees a lot of potential for XO's bank debt or he is just protecting his $750 million bond position in the company. That investment would stand to be hurt by a stand-alone plan, said an analyst who follows the company. "Either way, he must think that by owning some of the bank debt, he can convince enough of the other bank lenders to change their original position and support his restructuring plan without insisting on the onerous covenants," he added.