This morning’s post revealed XO as having a final table seat at the Fiber Telecom Texas Hold’em Tournament. I also suggested that despite their respectable chip stack, their position is a bit shaky. You might say they are playing recklessly. This post will add some color to my point.
R2 Investments owns a 6.6% equity stake in XO Communications. Read this exert from a letter that R2 sent to certain directors of XO:
“Should any of these ‘new financing alternatives’ being considered include refinancing the debt facility and the preferred equity owned by affiliates of XO’s majority stockholder and chairman, Carl Icahn, we write to place you on notice that R2 will challenge any proposed transaction that it perceives to be unfair to XO’s minority shareholders or otherwise disadvantageous to XO, and will seek to hold you liable for any such breach of your fiduciary duty.”
Wow. Now those are fighting words. It will be intriguing to see how this situations plays out.
For more insight into the letter, please refer to this post (http://ronorol.blogspot.com/2008/02/icahn-vs-r2-investments.html) that appeared in Ronald D. Orol’s blog on active hedge fund managers.
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He is running off the old stock holders. He wants to whole thing in his pocket so he can but another IXC and then present a nice package to one of the three remaining LD carriers.