McLeodUSA pre-packaged plan of reorganization confirmed, expects to emerge in January

By Caroline Salls

Pittsburgh, Dec. 16 - McLeodUSA Inc.'s pre-packaged plan of reorganization was confirmed Thursday by the U.S. Bankruptcy Court for the Northern District of Illinois and the company obtained final approval of its $50 million of its debtor-in-possession facility from JPMorgan Chase Bank, NA, according to a company news release.

The company said it expects to emerge from Chapter 11 in January.

Upon consummation of the plan, McLeodUSA's DIP financing will be replaced with a new $50 million revolving credit facility.

The company's $677.3 million of secured junior bank debt will be converted into 100% of the equity of the reorganized company, and the existing $100 million in secured senior bank debt will be canceled and replaced with a new $100 million term facility.

Holders of the company's existing preferred and common stock will receive no recovery under the plan.

Treatment of creditors under the plan will include:

• Holders of other secured and general unsecured claims will receive 100% recovery though reinstatement of their claims;

• Holders of $100 million in junior secured pre-bankruptcy lender claims will receive 100% recovery in cash;

• Holders of $677.28 million in senior secured pre-bankruptcy lender claims will receive 27% to 38% recovery in 100% of the new common stock of the reorganized company, plus cash for fees and expenses required under the credit agreement.

"As we emerge from Chapter 11, we will be able to put an even greater focus on strengthening our sales, operational and financial performance," chief restructuring officer Stan Springel said in the release.

DIP terms

The DIP facility includes $23.4 million for letters of credit.

The DIP will mature at the earliest of six months; upon the acceleration of the loans; upon the consummation of the plan of reorganization and 45 days after entry of an interim DIP order.

Interest is Libor plus 400 basis points. The letter-of-credit fee is 400 basis points. The unused portion fee is 50 basis points.

Maturity on the exit facility will be five years. Interest will be Libor plus 750 basis points, with a 50 basis point unused portion fee.

As previously reported, the company has reached an agreement to sell its corporate headquarters in Cedar Rapids, Iowa, to Life Investors Insurance Co. of America, an Aegon USA Inc. affiliate, in a transaction valued at about $27 million.

The sale is expected to close by the end of the year.

McLeodUSA, a Cedar Rapids, Iowa-based integrated communications services company, filed for bankruptcy on Oct. 28. Its Chapter 11 case number is 05-63230.

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