McLeodUSA plans to redeem some 10½% notes with ATS sale, IPO proceeds

By Angela McDaniels

Seattle, March 22 - McLeodUSA Inc. plans to redeem a portion of its $120 million 10½% senior second secured notes due 2011 at 110.5% of par plus accrued interest, according to an S-1 report filed with the Securities and Exchange Commission on Thursday.

The notes have an equity clawback provision for up to 35% of the notes through Oct. 1, 2009.

The company plans to fund the note redemption with proceeds from the $16 million sale of its ATS division to ImOn Communications, LLC on March 9 and with a portion of the proceeds from a planned initial public offering of up to $172.5 million common shares.

Proceeds from the IPO will also be applied toward the continued expansion of the company's internet protocol platform and network, for general corporate purposes and, potentially, to acquire complementary businesses, technologies and products, according to the filing.

Hiawatha, Iowa-based McLeodUSA provides facilities-based integrated voice and data services for businesses in the Central, Southwestern and Rocky Mountain states.

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