Monday December 3, 9:45 pm Eastern Time
McLeodUSA restructures, may file for bankruptcy
(adds details throughout
CEDAR RAPIDS, Iowa, Dec. 3 (Reuters) - Local telephone and data services provider
McLeodUSA Inc. (NasdaqNM:MCLD - news) on Monday announced a restructuring plan
to reduce its debt but warned it may seek Chapter 11 bankruptcy protection.
The firm said investment firm Forstmann Little would buy its telephone
directory publishing unit for $535 million and invest $100 million in the
firm.
McLeodUSA said it will also make an offer under which its
publicly-traded bonds will be tendered in exchange for at least $560
million in cash, plus about 14 percent of its common stock after the
recapitalization is complete.
But the firm said that it may pursue a Chapter 11 bankruptcy filing to retire
all its outstanding bond issues. In such an event, only the holding company
McLeodUSA Inc. would be included in the filing, it said. Its operating
subsidiaries, including McLeodUSA Telecommunications, McLeodUSA
Publishing and ICTC, would be excluded, it said.
The sale of its publishing arm to Forstmann would provide cash for the bond tender, McLeodUSA said.
The Cedar Rapids, Iowa-based company said the financial restructuring plan, which is subject to agreement with the
McLeodUSA bondholders and other security holders, would eliminate at least 95 percent of its $2.9 billion of bond debt and
the associated $300 million of annual interest expense.
Forstmann also agreed to convert its existing preferred stock into common stock after the recapitalization, which is expected to
be completed during the first or second quarter of next year. Buyout firm Forstmann would own about 45 percent of the the
firm's stock after the deal is completed, McLeodUSA said.
The firm said its restructuring as well its potential bankruptcy filing would have no impact on its employees, suppliers and
customers.
McLeodUSA also said it had reached an agreement with its lenders to amend its $1.3 billion senior credit facility to allow it to
use the cash from the sale of its publishing business to retire its outstanding bond debt.
McLeodUSA also said it had agreed with its lenders to reduce its current revolver by $140 million and offer for sale its Illinois
Consolidated Telephone Company regulated incumbent local exchange subsidiary, subject to the completion of the
recapitalization.
The company said it expected to sell the local exchange within 14 months after the recapitalization and would use up to $225
million of the amount from that sale to reduce its term loan commitments.
Gruß Dr. Broemme
