UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) October 28, 2005
MCLEODUSA INCORPORATED
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(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
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(State or Other Jurisdiction of Incorporation)
0-20763 42-1407240
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(Commission File Number) (IRS Employer Identification No.)
McLeodUSA Technology Park
4200 C. Street SW, P.O. Box 3177
Cedar Rapids, IA 52406-3177
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(Address of Principal Executive Offices) (Zip Code)
(319) 364-0000
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On November 1, 2005, McLeodUSA Incorporated (the "Company") and certain of its
subsidiaries (the "Guarantors", and together with the Company, the "Debtors")
entered into a Revolving Credit and Guaranty Agreement (the "DIP Agreement"),
which is hereby incorporated by reference and attached hereto as Exhibit 10.1,
among the Debtors, the lenders party thereto, and JPMorgan Chase Bank, N.A.,
as agent (the "Agent"). The DIP Agreement received interim approval by the
Bankruptcy Court on October 31, 2005, but remains subject to final approval by
the Bankruptcy Court. The DIP Agreement provides for up to $50 million of
debtor-in-possession financing (the "Commitment") to fund the Debtors'
post-petition operating expenses and supplier and employee obligations, up to
$20 million of which will be available to the Debtors until the entry of a
final order ("Final Order") by the Bankruptcy Court approving the DIP
Agreement. Obligations under the DIP Agreement are secured by a superpriority
lien in favor of the Agent over the Debtors' assets. Interest on borrowings
under the DIP Agreement are at an alternate base rate plus 3.00%, or, at the
Debtors' option, LIBOR plus 4.00% for interest periods of one, two, or three
months. Such interest shall be payable monthly in arrears or upon the
termination of the Commitment.
The DIP Agreement subjects the Debtors to certain obligations, including the
delivery of cash flow forecasts and operating budgets at specified intervals.
Furthermore, the Debtors are subject to certain limitations on the payment of
indebtedness, entering into investments, the payment of capital expenditures
and the payment of dividends. In addition, payment under the DIP Agreement may
be accelerated following certain events of default including, but not limited
to, (i) the conversion of any of the Cases to a case under chapter 7 of the
Bankruptcy Code or the appointment of a trustee pursuant to chapter 11 of the
Bankruptcy Code; (ii) any of the Debtors' making certain payments of principal
or interest on account of pre-petition indebtedness or payables; (iii) a
change of control in any of the Debtors; (iv) an order of the Bankruptcy Court
permitting holders of security interests to foreclose on the debt on any of
Debtors' assets which have an aggregate value in excess of $500,000; (v) the
entry of any judgment in excess of $1 million against any Debtor, the
enforcement of which remains unstayed; and (vi) a plan of reorganization
supported by lenders holding a majority in amount of the loans under each of
the Company's pre-petition loan agreements not being confirmed pursuant to an
order of the Bankruptcy Court within 60 days after the petition filing date.
Notwithstanding acceleration pursuant to an event of default, the maturity
date on the Commitment terminates six (6) months from the petition filing
date. Such maturity date may terminate earlier following the consummation of a
plan of reorganization in the Cases.
Certain of the lenders under the DIP Agreement are also lenders under the
Company's pre-petition credit agreements. In addition, some of the lenders or
their affiliates may hold equity positions in the Company.
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION
UNDER AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
The information provided in Item 1.01 of this Current Report on Form 8-K is
incorporated into this Item 2.03 by reference.
ITEM 2.04 TRIGGERING EVENTS THAT ACCELERATE OR INCREASE A DIRECT FINANCIAL
OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT.
The Debtors' bankruptcy filing on October 28, 2005 is an event of default
under the Credit Agreement dated as of May 31, 2000, as amended, among the
Company, the lenders party thereto and the Agent (the "Credit Agreement") and
the Credit Agreement dated as of April 16, 2002, as amended, among the
Company, the lenders party thereto and the Agent (the "Exit Facility" and,
together with the Credit Agreement, the "Credit Facilities"). As a result of
such default, the commitments under the Exit Facility are immediately
terminated and all borrowings, with accrued interest thereon, and all other
amounts owed by the Company under the Credit Facilities became immediately due
and payable in the amount of approximately $777 million.
As a result of the bankruptcy filing, the ability of the Company's creditors
to seek remedies to enforce their rights under the Credit Facilities are
stayed and creditor rights of enforcement are subject to the applicable
provisions of the Bankruptcy Code.
ITEM 8.01 OTHER EVENTS.
On October 31, 2005, the Company issued a press release, which is hereby
incorporated by reference and attached hereto as Exhibit 99.1, announcing the
approval of first-day motions by the Bankruptcy Court.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
Exhibit No. Description
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10.1 Revolving Credit and Guaranty Agreement, dated as of November
1, 2005 among McLeodUSA Incorporated, certain of its
Subsidiaries, the lenders party thereto and JPMorgan Chase
Bank, N.A., as agent
99.1 Press Release, dated October 31, 2005
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MCLEODUSA INCORPORATED
Dated: November 2, 2005 By: /s/ James E. Thompson
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Name: James E. Thompson
Title: Group Vice President and
General Counsel and
Secretary
EXHIBIT INDEX
Exhibit No. Description
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10.1 Revolving Credit and Guaranty Agreement, dated as of November
1, 2005 among McLeodUSA Incorporated, certain of its
Subsidiaries, the lenders party thereto and JPMorgan Chase
Bank, N.A., as agent
99.1 Press Release, dated October 31, 2005