OT here goes another one.. The headline makes it look like it's going out of business, I don't think so, I'm gonna keep an eye on this one.
------------------------------------------------------------
Thursday January 31 3:40 PM ET
McLeodUSA Files for Bankruptcy
By Siobhan Kennedy
NEW YORK (Reuters) - Local telephone company McLeodUSA Inc. (Nasdaq:MCLD - news) on Thursday filed for bankruptcy -- the latest in a rash of bankruptcies in the battered telecommunications industry -- with a reorganization plan that will erase about $3 billion in bond debt.
The Chapter 11 petition was filed in U.S. Bankruptcy Court in Delaware and listed assets of $4.79 billion and total debt of $4.57 billion. Chapter 11 bankruptcy protects companies from debts or liabilities during reorganization.
As part of the restructuring, buyout firm Forstmann Little & Co. said it invested an additional $175 million in the telecoms firm, making it the largest shareholder of McLeodUSA, with an approximate 58 percent holding.
``It's the best solution for the company,'' said a portfolio manager with a large Midwestern mutual fund company who asked not to be named. ``You've reached the end of the line for a number of these companies. They hung on for as long as they could and now they're starting to topple like dominoes.''
The bankruptcy marks the latest meltdown in telecommunications, which earlier this week was rattled by the bankruptcy of Global Crossing Ltd. (GBLXQ.PK) (NYSE:GX - news), a warning from Level 3 Communications Inc. (Nasdaq:LVLT - news) that it might violate a credit agreement and dismal growth forecasts from companies such as Qwest Communications International Inc. (NYSE:Q - news)
McLeod's stock, trading in which was halted on the Nasdaq on Thursday, has lost almost all of its value, closing at 18 cents on Wednesday. That's far below its 52-week high of $21.125 and off from an all-time high of about $35 in March 2000 when the dot.com and tech bubble peaked.
NO SERVICE DISRUPTION
The pre-negotiated filing, which only includes the parent company McLeodUSA and none of its subsidiaries, will not disrupt service, customers or employees and is similar to the restructuring announced in December, McLeod said.
Among the top creditors listed were United States Trust Co. of New York, which is owned by Charles Schwab Corp. (NYSE:SCH - news), Think Fast Consulting, based in Chicago, and Travel and Transport Inc. of Iowa. The company provides service in 25 states in the Midwest and Western United States.
McLeod said it did not need nor expect to obtain money for day-to-day operations, or debtor-in-possession financing. The reorganization, the fourth-largest in the telecommunications sector, is expected to take effect in the second quarter.
Under the plan, McLeodUSA's bondholders will receive up to $670 million in cash, $175 million of preferred stock convertible into 15 percent of the reorganized company's common stock, and five-year warrants to purchase an additional 6 percent of the company's stock.
Holders of the McLeod's common stock will retain about 17 percent of the shares of the reorganized McLeodUSA.
McLeod said $100 million of the bondholder's cash will come from Forstmann Little's fresh investment.
Forstmann also backed troubled telecommunications company XO Communications Inc. In November, XO said Forstmann, with Telefonos de Mexico SA de CV, planned to put up $800 million to take control of the voice and data services provider, fighting off potential bankruptcy.
An ad hoc committee of bondholders, which holds 23 percent of its bonds, voted unanimously in favor of McLeod's reorganization. The plan also has the support of investors holding about 45 percent of its preferred shares, including funds managed by Forstmann Little.
FEW COMPANIES TO SURVIVE
Clark McLeod will remain chairman of the board of directors and Stephen Gray will remain president and chief executive. Chris Davis will stay on chief financial officer, McLeod said.
Network builders and telephone companies like McLeod spent about $90 billion over the last four years building out fiber-optic networks in the United States, which now has 39 million miles of glass fiber. The industry has about $300 billion in debt, according to Fifth Third Technology fund.
But a 50 percent drop in prices for transmitting voice and data over the past year already has forced companies such as PSINet Inc. and 360networks into bankruptcy and others such as WorldCom Inc. (Nasdaq:WCOM - news) to lay off workers by the thousands.
Analysts say less than 5 percent of that fiber is ``lit'' -- or has the electronics, amplifiers, and software needed to carry information. Credit Suisse First Boston estimated less than 1 percent of the fiber in the ground is used.
Ultimately, three or four financially viable local phone companies will emerge from the dust, including a reorganized McLeod and Level 3, the portfolio manager said.
Email this story - View most popular | Printer-friendly format
Earlier Stories
McLeodUSA Files Bankruptcy, in Debt Pact (January 31)
Archived Stories by Date: Jan 30 Jan 29 Jan 28 Jan 27 Jan 26 Jan 25 Jan 24 Jan 23 Jan 22 Jan 21 Jan 20 Jan 19 Jan 18 Jan 17 Jan 16 Jan 15 Jan 14 Jan 13 Jan 12 Jan 11 Jan 10 Jan 09 Jan 08 Jan 07 Jan 06 Jan 05 Jan 04 Jan 03 Jan 02 Jan 01
News Resources
Message Boards: Post/Read Msgs
Conversations: Start a live discussion
News Alerts: | | | | |
More Alerts: News Bulletins, News, Mobile, Stocks
ADVERTISEMENT Weekly Specials
· Rent all the DVDs you want, $20 a month- Try FREE!
· The Easiest Way To Get A Home Loan
· Access Your PC from Anywhere - Free Download
· Get your tax refund - fast! - using TurboTax® on Yahoo! Finance
· FREE credit report & trial membership!
· Get 50% Off Delivery of The New York Times!
· Subscribe to USA TODAY and get a FREE Atlas
· Health Insurance-compare & shop online
ADVERTISEMENT
Stop throwing money away on spoiled food!
Natural de-icer means you’ll have to shovel less this winter
Breathe easier with cleaner, moist air circulating in your home...
A floor lamp that spreads sunshine all over a room
Get instant warmth in the coldest conditions
Why pay for cellular phone service if you need it only for emergencies?
Ever wonder what the “other stereo company’s” sound engineers listen to at home?
Search News
Advanced
Search: Stories Photos Audio/Video Full Coverage
Home Top Stories Business Tech Politics World Local Entertainment Sports Op/Ed Science Health Full Coverage
--------------------------------------------------------------------------------
Copyright © 2002 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.
Copyright © 2002 Yahoo! Inc. All rights reserved.
Questions or Comments
Privacy Policy - Terms of Service |
