XO's new capital structure

Well, I went through the exercise of working out XO’s new capital structure, as compared with the old one:

	Before	After	Voting Shares	Comments
Senior Secured	$398M	0		now gone
Senior Note	$75M	0		now gone
Class A Pref	$250	$250	53M	6%, conv @ $4.62, >50% owned by Icahn
Class B Pref	0	$555	367M	7%, conv @ $1.50, 100% owned by Icahn
Class C Pref	0	$225	150M	9.5%, not conv, 100% owned by Icahn
Cash	$133	$440		sufficient to spend on capex
Marketcap @ 0.61	$111	$111	182M	>50% owned by Icahn
EV	$701	$701

All in all, it looks much better than it did before since the due dates have been pushed out.  But I have to say this has been a lesson in both power and relative perceptions.  If you had asked [minority] XO shareholders if they would have accepted this deal last year when the stock price was at $3 to $4 or even $5, they would have skinned you alive.  Now, after having been at $0.30 with their necks pinned to the gym floor for a while by Icahn, it seems that a $1.50 conversion price seems like a great deal and a relief, and the potential cash return from the NOL usage was an unexpected benefit.

By my calculations, as of today Icahn has over 85% of the voting rights, and if the minority shareholders buy the new preferred stock they are being offered, it is still over 80%.  That percentage being over 80% means he can access the NOLs, which was the unofficial goal of this soap opera. Now perhaps we can move on, but one can’t help but wonder how rough this would have been if R2/Amalgamated hadn’t made such a public stink.

I am still quite unclear what happens to the arrangement for NOLs with Icahn in the case of a buyout, I don’t see an easy way for him to keep them.  Perhaps the return to XO of 30% of the tax savings Icahn generates from the NOLs serves notice that whoever buys XO must also buy out the NOL arrangement.  It is an odd one though, one could construe this arrangement as XO selling its NOLs to its majority shareholder since it can’t use them itself, thus deriving a tax benefit that they shouldn’t actually be entitled to yet in the universe the rest of us inhabit.  Tax law is wierd.

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