Leading Competitive Carrier Announces First Major Funding Transaction After Terrorist Attacks

DALLAS, TX , Sept. 18, 2001 -- Allegiance Telecom, Inc. (Nasdaq: ALGX), an integrated communications provider (ICP), announced today its 27-member senior credit syndicate is funding a total of $350 million under Allegiance's $500 million credit facility - one of the first major funding transaction to occur since last Tuesday's terrorist attacks on the United States. Allegiance elected to draw down its $150 million delayed draw term loan due December 31, 2006 and a $200 million revolving loan, also due on December 31, 2006.

"We believe that drawing on the credit facility at this time provides Allegiance with a tremendous opportunity to lock in attractive interest rates to continue to fund our business plan," said Thomas M. Lord, Allegiance Telecom executive vice president of corporate development and chief financial officer. "We believe by drawing funds now at an initial interest rate of 6.28 percent, we can take full advantage of the significant interest rate cuts implemented by the Federal Reserve this year."

"I especially want to express our gratitude to our banks for much more than just their continued support for our business plan - I want to thank them for their hard work under the horrific conditions following the terrorist attack on our nation," Lord said. "We initiated this planned drawdown after the Labor Day weekend. In spite of the horrible tragedy, we were able to close yesterday - only two working days after our originally planned closing date."

"We remain comfortable with the covenants in the form in which they were set when this facility was established in February 2000. Allegiance has not sought to amend these covenants in any respect," Lord said. "The $350 million will be invested in short term Treasury securities, consistent with our cash investment policies. We expect over the next 30 to 60 days to effectively lock in our borrowing cost by using hedging techniques to move the floating rate debt to a fixed rate basis," he said. "On a pro forma basis at the end of 2Q01, Allegiance Telecom's cash on hand would have stood at $662 million."

"Conservatively funding our business plan has been the cornerstone of the Allegiance financing strategy," said Royce J. Holland, chairman and chief executive officer of Allegiance Telecom. "Today we have demonstrated that there should be no doubt Allegiance Telecom has remained faithful to this principle. We have $150 million remaining under the $500 million credit facility and we currently plan to draw this portion only if opportunities arise beyond our current business plan."

Based in Dallas, Allegiance Telecom is a facilities-based integrated communications provider (ICP) offering businesses a complete package of telecommunications services, including local, long distance, international calling, high-speed data transmission and Internet services. Allegiance is currently operational in 34 U.S. markets including: Atlanta, Austin, Baltimore, Boston, Chicago, Cleveland, Dallas, Denver, Detroit, Fort Lauderdale, Fort Worth, Houston, Long Island, Los Angeles, Miami, Minneapolis/St.Paul, New York, Northern New Jersey, Oakland, Ontario/Riverside CA, Orange County, Philadelphia, Phoenix, Portland, Sacramento, St. Louis, San Antonio, San Diego, San Francisco, San Jose, Seattle, Tampa, Washington D.C. and White Plains, N.Y. The Company is targeting a total of 36 major metropolitan areas by the end of 2001 with its single approach. Allegiance's common stock is traded on the Nasdaq National Market under the symbol ALGX.

Certain statements in this press release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, and the Company intends that such forward-looking statements be subject to the safe harbors created thereby. The words "believes," "expects," "estimates," "anticipates," "plans," "will be" and "forecasts" and similar words or expressions identify forward-looking statements made by or on behalf of the Company. These forward-looking statements were derived using numerous assumptions and are subject to many uncertainties and factors, which may cause the actual results of the Company to be materially different from those stated in such forward-looking statements. Examples of such uncertainties and factors include, but are not limited to, the Company's ability to timely and effectively provision new customers; technological, regulatory or other developments in the industry; and the ability to develop and maintain efficient billing, customer service and information systems. Additional factors are set forth in the Company's SEC reports, including but not limited to the Annual Report on Form 10-K for the year ended December 31, 2000. The Company does not undertake any obligation to update or revise any forward-looking statement made by it or on its behalf, whether as a result of new information, future events or otherwise.