McLeodUSA files Chapter 11 bankruptcy

The court Oct. 31 approved the company’s First Day Motions, which allows McLeod to conduct business as usual and maintain its existing cash management systems.

The independent telecommunications services provider Oct. 28 filed its plan to restructure $777.3 million in debt. The company will continue to pay all trade creditors and salaries for its 1,720 employees and maintain existing bank accounts.

A court hearing has been scheduled for Dec. 15 to approve the company’s disclosure statement and plan of reorganization. Until then, McLeod will have $27 million in cash available.

Other terms of bankruptcy proceedings include a commitment from lenders for debtor-in-possession financing of up to $50 million, to be replaced after exiting bankruptcy with a revolving credit facility – a loan that can be repaid at McLeod’s discretion for a certain amount of time.

If the plan is approved, about $677.3 million of secured junior debt will be converted into 100 percent of the company’s equity, the company’s existing $100 million in secured senior debt – with priority over the junior debt -– will be cancelled and replaced with a $100 million term facility, and all existing preferred and common stock will be cancelled and holders of that stock will have no recovery.

McLeodUSA Inc. operates in 25 states and provides local service in Springfield.