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McLeodUSA puts itself on the block - sources
Fri Jan 14, 2005 03:49 PM ET
NEW YORK, Jan 14 (Reuters) - McLeodUSA Inc. (MCLD.O: Quote, Profile, Research) has put itself on the block in a move that could mean a second big telecommunications write-off for its controlling shareholder, Forstmann Little & Co., sources familiar with the situation said this week.
Cedar Rapids, Iowa-based McLeodUSA, which provides phone service in 25 Midwest and western states, has recently been shopping for an investment banker to help with the sale, the sources said. It is not clear whether one has been chosen, the sources said.
McLeodUSA, started in 1992 by Clark McLeod, a former junior high school teacher, could not be immediately reached for comment. A spokesman for Forstmann declined to comment.
Forstmann Little, a veteran New York buyout firm, invested $1 billion into McLeodUSA for a 12 percent stake in 1999 at a time when Internet and telecommunications investments were hot.
But like many telephone companies that emerged after industry deregulation, McLeodUSA's debt loomed large and growth fell short, forcing the company into Chapter 11 bankruptcy in January 2002.
The company exited bankruptcy within several months in a plan that swapped $3 billion of debt for equity with bondholders, with Forstmann investing another $100 million to gain a 58 percent controlling stake in the company.
Now the company finds itself without the market heft and deep pockets needed to fight competition from national telephone companies that offer discounted packages of local, long-distance, wireless and Internet services.
For the third quarter ended Sept. 30, McLeodUSA's net loss swelled to $352.8 million on revenues of $168 million. That compared to a loss of $82 million on revenues of $211 in the year-earlier quarter.
It had just $26 million in cash at the end of the third quarter, down from $56.5 million at the beginning of 2004, according to regulatory filings.
McLeodUSA has a market value of about $150 million, with its shares trading for less than $1 for much of 2004. Its shares were recently trading at 75 cents, down 4 cents.
The previously successful investing career of Forstmann Little, led by high-profile buyout pioneer Ted Forstmann, took a hit from the telecom bust.
The firm, founded in 1978, suffered financial losses and a bruised reputation by investing in McLeodUSA and another telecom company, XO Communications (XOCM.OB: Quote, Profile, Research) . His firm invested a total of $2.5 billion in the companies.
Forstmann lost control of Reston, Virginia-based XO in 2002 after a heated bankruptcy court battle with investor Carl Icahn, who is now chairman of XO and its largest shareholder.
Forstmann suffered further embarrassment when the state of Connecticut sued the firm last June to recoup $125 million it invested with Forstmann in both XO and McLeodUSA. While Forstmann was found guilty of contractual violations with the state, the jury didn't award the state any damages against the firm.
Forstmann said recently that he has no plans to raise a new fund to conduct further buyouts.
auf diese Meldung fiel der Kurs in den letzten 20 Handelsminuten um gut 10%
am Samstag 15.1.5 Staatsanzeiger Zeitung !
Wir kommentieren keine Gerüchte und Spekulation, sagte '' McLeodUSA Sprecher Bryce Nemitz.
bin mal auf morgen gespannt,werde zur Eröffnung erste Posi aufbauen
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