McLeodUSA Inc. (www.mcleodusa.com) announced today it has emerged from the U.S. Bankruptcy Court after its amended plan of reorganization went into effect.
The competitive local exchange carrier, based in Cedar Rapids, Iowa, is among a sparse number of embattled operators to emerge from the bankruptcy court with a clean balance sheet.
McLeodUSA has eradicated $3.3 billion in high yield debt and $325 million in interest payments while current investor Forstmann Little (www.forstmannlittle.com) has agreed to inject $175 million in new equity, becoming a majority owner with a 58 percent stake.
McLeodUSA was one of the largest competitive carriers to garner Wall Street’s attention after the 1996 Telecommunications Act.
Management said McLeod was better positioned than some other competitive carriers because it provides voice and data services to small- to medium-sized businesses and households in secondary markets, where there is a scarcity of broadband access and less competition than in the largest U.S. cities.
But McLeodUSA amassed an enormous debt load and extended itself beyond its 25-state regional footprint, seeking to run a national network and operate other telecom lines such as its Directory Publishing Business. Last fall the company announced several streamlining measures, including abandoning development of the national network. As part of the restructuring plan McLeodUSA has sold its directory publishing business to the Yell Group Ltd. (www.yellgroup.com) for $600 million.
The company provides integrated communications services in 25 states encompassing the Midwest, Southwest, Northwest and Rocky Mountain region.
