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ICG Communications Inc. may end up in the buyout bargain basement early next year if new funding doesn’t materialize to pull the troubled telecommunications company out of its slump. Analysts are skeptical whether the Englewood, Colo.-based company will be able to raise additional funding following the loss of board members representing the company’s major investors, Liberty Media Corp. and Hicks, Muse, Tate & Furst. ICG CEO Carl Vogel and board member Gary Howard, both of Englewood-based Liberty, and board member Thomas Hicks of private equity fund Hicks Muse resigned Sept. 18, one day after the company slashed its profit and revenue outlook for the year. At least six law firms have initiated class-action lawsuits on behalf of ICG shareholders, accusing ICG of withholding information about operational problems and a consequent loss of customer commitment. And now, there is a possibility that Liberty and Hicks Muse will initiate legal actions of their own. Neither would comment on ICG, but a source close to Hicks Muse indicated that the Dallas-based investment firm considers itself a victim of ICG’s overly optimistic projections. “ICG’s share price turned out to be heading south very soon after the [Hicks Muse] investment,” said the source, “so there’s a suspicion that the whole story wasn’t told at the time of investment.” David Heger, an analyst at A.G. Edwards Inc. in New York, said, “There’s a sense that at least Liberty may not have been aware of all the problems, since [Liberty Media senior vice president] Carl Vogel agreed to become ICG’s CEO in August, then resigned less than a month later. It gives the sense that the full story wasn’t told.” ICG’s revised 2000 earnings report forecasts Ebitda of $17 million on revenues of $630 million, with capital expenditures of $1 billion. ICG attributed the downturn to “significant customer service issues within certain segments” of its remote-access Internet business, including network outages and equipment failures, among other problems. Liberty and Hicks Muse are in a doubly invidious position. Both have lost heavily on their investments, $500 million in the case of Liberty and $230 million in that of Hicks Muse, undertaken when ICG share prices were near their peak in February. ICG’s shares traded Friday at about 50 cents, after a high of $39.25 in March. Now, in addition, at least one class-action lawsuit points to the Hicks-Liberty investments, along with $20 million from Gleacher Capital Partners of New York, as one factor that gave other investors the confidence to stake their money on ICG. The suit, filed by New York’s Milberg Weiss Bershad Hynes & Lerach LLP, excludes Liberty, Hicks Muse and Gleacher from the potential plaintiff class. Prudential Securities Inc. analyst Christopher Larsen said Liberty and Hicks Muse might file their own lawsuits, noting, “There’s a lot of speculation on why they withdrew” from the ICG board. But he added, “There could be other reasons to withdraw.” Neither Larsen nor Heger was optimistic about ICG’s chances for further funding. “The Hicks and Liberty pullout was a big slap in the face,” Heger said. “It reflects a lack of confidence.” In addition, Standard & Poor’s recently lowered its credit rating on ICG, stating that it “expects the company to run out of cash by year-end 2000 or early 2001 unless additional funding by the banks is made available.” Heger estimated that ICG had enough cash to operate until early next year but doubted funding would come through during the current market rejection of competitive local exchange carriers and given ICG’s specific problems. An ICG spokeswoman declined to comment either on the class action suits or on ICG’s prospects for funding. ICG has hired investment banks Wasserstein Perella & Co. and Zolfo Cooper LLC to help it with “various problems.” Neither company was available for comment. (Wasserstein Perella & Co. is the general partner in a fund that owns The Daily Deal and Law.com.) Copyright (c)2000 TDD, LLC. All rights reserved.

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