XO Communications said Thursday that it will receive an $800 million equity investment from investment firm Forstmann Little and Telefonos de Mexico, a major telecommunications carrier in Mexico. If the deal is completed, the company's present shareholders will "lose substantially all of the value of their investment," XO said in a statement. The company added that it will not make dividend or interest payments on unsecured notes or preferred-equity securities after Nov. 30.
Each company will invest $400 million in XO in return for a 39 percent stake in the U.S. telecommunications carrier; XO's bondholders and employees will control the remaining stake. The agreement hinges on the troubled broadband service provider restructuring its balance sheet and receiving the necessary regulatory approvals as other upstart phone companies face similar woes. XO reported a wider loss on Nov. 8 of $734.7 million in the third quarter, including charges, compared with a loss of $394.2 million in 2000.