Bank debt for XO Communications notched up to 75 from 73 last week as the company bought back $500 million of its bonds through Citigroup. A bank spokesman declined to comment. XO, based in Reston, Va., is a competitive local exchange carrier. A spokeswoman did not return calls by press time.
Dealers said this could be a step in the right direction. "The paper sucked wind recently with the rest of the telecom sector," one noted, adding that a shortage of liquidity and disappointing earnings were the double-whammy on the company. "This [buyback] will reduce their leverage and will reduce the risk investors see in the company." Meanwhile, they said there would be a ceiling on how far the credit will climb for now. "The bottom line is it's still telecom," said one.
The pro rata for XO, formerly known as Nextlink, was trading in the 95-951/ 2 range last fall (LMW, 10/23). The term loan "B" was trading at 99. At the time XO was considered one of the stronger CLECs, but dealers also noted some impending softness in the bond prices.