XO Could Consolidate in OC in Wake of Bankruptcy
By ANDREW SIMONS
Reston, Va.-based XO Communications Inc. could move people from Los Angeles and San Diego to its Santa Ana office in the wake of the company’s bankruptcy filing last week, a company source said.
“If anything, we’re building up our staff here,” said a local employee who asked not to be named. “We’re moving people here from other offices.”
XO currently employs 300 people in Orange County, though details about how many people the company might move to Santa Ana weren’t available. In the past year and a half, XO has bumped its staff up 75% as it increased capacity in OC.
Like other telecommunications and Internet service providers, XO aggressively built its network in the past few years in anticipation of more demand for services. But with the economic fallout, that demand never materialized.
XO, strapped with $8.5 billion in debt, filed for bankruptcy protection so it can reorganize its finances. The filing came as a deal between XO and a group including financier Ted Forstmann’s Forstmann Little & Co. and Tel & #233;fonos de M & #233;xico SA de CV that would have injected $800 million into the company was in danger of falling through.
“Simply stated, the company has too much debt, given the current and projected level of business operations,” XO Chief Executive Daniel Akerson said in a statement.
Company officials have said that they do not expect to close any facilities or lay people off as a part of the bankruptcy.
“This financial restructuring and the related Chapter 11 filing are not a result of operational issues, but are driven by a need to deleverage the company and resolve our balance sheet issues,” Akerson said.
Even so, the company didn’t rule out shifting around personnel inside the company as a prudent business practice.
“We are a company that’s grown really quickly,” said Todd Wolfenbarger, an XO spokesman. “We have looked really carefully at costs. Over the past two years we were about building networks. That’s changed. We’re running them now.”
In its bankruptcy filing, XO outlined two scenarios,primary and contingency plans,for reorganization. The first is based on the deal with Forstmann and Telmex, both of which have pulled back because they say XO can’t meet several terms of an agreement.
If that plan fails, XO plans to convert $1 billion in loans into common equity and $500 million of junior secured debt. XO also said it will issue additional equity through a $250 million rights offering to its senior unsecured creditors.
XO, formerly Nextlink Communications Inc., was founded in 1994 to provide fiber-optic communications to businesses.
In Orange County, XO offers local phone service, which has caused its own share of headaches. XO blames some of its troubles on SBC Communications Inc., parent company of Pacific Bell, which own the lines that reach consumers.
In a response to Pacific Bell’s request to offer long distance service since it had met requirements to open its network to competition, XO said Pacific Bell had been less than helpful.
The company cited a billing issue that kept an XO customer, one of OC’s largest companies, without phone service.
