McLeodUSA soliciting lender approval for pre-packaged Chapter 11 filing

By Caroline Salls

Pittsburgh, Oct. 19 - McLeodUSA Inc. has begun to solicit approval from its lenders for a restructuring of its $777.3 million in bank debt plus accrued interest, according to a company news release.

If the required approvals are received, the company expects to promptly file its Chapter 11 bankruptcy petition and plan of reorganization, the release said.

McLeodUSA's $773.3 million in outstanding credit facility debt includes $100 million in funded senior debt and $677.3 million of junior debt, plus accrued interest.

Under the terms of the pre-packaged Chapter 11 plan of reorganization, the existing senior debt will be converted into a $100 million term facility, and obligations under the junior debt will be converted into 100% of the company's equity.

All of McLeod's existing preferred stock and common stock will be cancelled, and holders of that stock will have no recovery.

"This restructuring will significantly improve the company's financial position, thereby strengthening our ability to execute the VoIP product growth strategy launched earlier this year while continuing to provide the high quality voice and data services that our customers have come to expect," chief restructuring officer Stan Springel said in the release.

The company's lenders have agreed to provide up to $50 million in debtor-in-possession financing that will be replaced with a $50 million revolving credit facility upon final confirmation of the proposed plan of reorganization.

McLeodUSA is a Cedar Rapids, Iowa, telecommunications company.

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