XO shares surge on completion of $780 million preferred placements; DiamondCorp to raise £5 million

By Devika Patel

Knoxville, Tenn., July 28 - Shares of XO Holdings Inc., a telecommunications services company with investor Carl C. Icahn as its chairman, soared 57.5% on Monday after the company said it completed a previously announced $780 million private placement of preferred stock late Friday.

XO Holdings' shares (OTCBB: XOHO) climbed 23 cents on Monday to close at $0.63. The shares closed at $0.40 on Friday.

Proceeds of the placement will be used to help retire debt and fund the company's growth.

In other PIPE activity, DiamondCorp plc announced it has negotiated a £5 million private placement of bonds.

XO gets $780 million

XO Holdings concluded a $780 million private placement of two new series of preferred shares on Friday.

The Herndon, Va.-based company sold 555,000 shares of its 7% class B convertible preferred stock for $555 million and 225,000 shares of its 9.5% class C perpetual preferred stock for $225 million to affiliates of Icahn, the company's chairman.

The company intends to offer up to 27,750 convertible preferreds and up to 11,250 perpetual preferreds in units to some of its large minority stockholders.

The convertible preferreds are convertible into common shares at $1.50 per share after one year.

The perpetual preferreds are not convertible.

Neither series of preferreds is redeemable unless there is a change-of-control event, at which time they are both mandatorily redeemable at the holder's option.

Proceeds were used to retire debt, the company said.

As a result of this placement, the company has retired the $395 million it owed under its senior secured credit facility, including interest, and about $78 million under its $75 million senior note, also including interest.

The remaining $307 million of proceeds will be used to fund the company's long-term strategic growth plan, which will accelerate revenue growth and improve operational efficiencies, as well as provide working capital for its businesses.

Icahn has been the company's chairman for five years.

"With its very strong balance sheet and unique network assets, XO should remain extremely competitive as a CLEC and wholesale carrier," Icahn said in a press release.

"The completion of this financing gives us the financial strength and flexibility that we need in order to support fast-growing areas of our businesses," XO chief executive officer Carl Grivner added in the release. "We are working diligently to maintain our competitive edge while transitioning our business into high-demand data and IP products and wireless services.

"With one of the most robust nationwide fiber networks in place today and as one of the largest holders of fixed wireless spectrum, we will continue to offer our customers the leading edge products and services that they require," Grivner concluded in the release.

DiamondCorp plans £5 million

London-based DiamondCorp arranged a $5 million loan facility with Africa Opportunity Fund LP.

The loan is comprised of cumulative redeemable secured bonds, which bear interest at a rate of 12% per year.

The bonds are to be repaid over three years, with principal payments of $500,000 due after 18 months, $1 million after two years, $1.5 million after 30 months and the balance of $2 million after three years.

The diamond producer may redeem the bonds at any time after the first anniversary date at between 105% and 108% of par, plus accrued interest.

Africa Opportunity Fund will also receive 1.65 million warrants, exercisable at 72p per ordinary share for three years.

Proceeds will be used for accelerated development of phase two underground mining at the company's Lace diamond mine.

"In these periods of difficult debt and equity markets, I am delighted in the vote of confidence demonstrated by AOF in the potential of the Lace diamond mine to deliver significant cashflow and earnings over a long mine life," DiamondCorp chief executive officer Paul R. Loudon said in a news release.

The company's shares (London: DCP) remained unchanged at 68p on Monday.

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