Icahn Loans XO Some Cash

October 8th, 2010 by · 4 Comments

We knew that XO Holdings (news, filings) would have to raise some money soon, as their cash levels have dipped well below the $100M mark.  In an SEC filing today, it was revealed that a Carl Icahn affiliated entity called Arnos Corp has extended a credit facility to XO in the amount of $50M at the higher of 6.75% and LIBOR+525, with 0.75% on undrawn portions.  It's a temporary measure though, as the new financing expires in just one year though, earlier if the company finds some other financing.     The company has stated several times its dislike for taking on debt, but they had softened the language recently as there weren't many reasonable alternatives and the pricing doesn't seem too painful.

In other words, Icahn has once again put off decisions about the company's future.  This $50M will let them continue as-is until next fall without another dilutive event and without accessing the public credit markets.  Perhaps he is waiting for some sort of resolution of the R2 lawsuit (and the recently filed class action)?  Or, as some no doubt believe, he may simply waiting for the right moment to swoop in with another offer to buy out minority shareholders.

If the world were in balance, the company could easily have found a buyer this year at a higher multiple than this - as shown by the sale of Deltacom last week as well as other fiber-rich assets.  But as far as I can tell, any potential strategic and private equity buyers are simply waiting for Icahn to get tired of the status quo - no sign of that yet.

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Categories: CLEC · Financials

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4 Comments So Far


  • carlkj says:

    6.75 percent wins hands down right now. What are the odds of seeing this man incarcerated in less than one year?

    All degenerate gamblers are welcome for setting the odds! imo

  • en_ron_hubbard says:

    Rob,

    While the announcement of a vanilla debt financing (even if from Icahn) was welcome, the real news was in the EBITDA and FCF guidance. XO now is guiding for a Q4 run rate EBITDA in the $240-250 million range. This is up from $71 million ($140 million run rate) in the first six months of ’10. They are also guiding to be essentially FCF breakeven in Q4.

    If anyone is paying attention this should move this horrible stock up a ways. I’m not holding my breath but i am going to break out a decent bottle of Chardonnay right now– XO shareholders deserve a little cheer in recompense for the suffering.

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