*Pages 1--5 from Microsoft Word - 52681.doc* PUBLIC NOTICE Federal Communications Commission 445 12 th Street, S. W. Washington, D. C. 20554 News Media Information 202 / 418- 0500 Fax- On- Demand 202 / 418- 2830 TTY 202 / 418- 2555 Internet: http:// www. fcc. gov ftp. fcc. gov DA 05- 2851 Released: October 27, 2005 DOMESTIC SECTION 214 APPLICATION FILED FOR TRANSFER OF CONTROL OF MCLEODUSA- DIP TO MCLEODUSA STREAMLINED PLEADING CYCLE ESTABLISHED WC Docket No. 05- 303 Comments Due: November 10, 2005 Reply Comments Due: November 17, 2005 On October 20, 2005, McLeodUSA Telecommunications Services, Inc., Debtor- in-Possession (“ McLeodUSA- DIP”) and McLeodUSA Telecommunications Services, Inc. (“ McLeodUSA,” together with McLeodUSA- DIP, “Applicants”), filed an application, pursuant to sections 63.03 and 63.04 of the Commission’s rules, 1 providing notice of a planned pro forma transfer of McLeodUSA to McLeodUSA- DIP in connection with a planned consensual (i. e., “pre- packaged”) Chapter 11 financial restructuring (“ Restructuring”) that will change the capital structure of McLeodUSA’s ultimate parent company, McLeodUSA Incorporated (“ Parent”, together with McLeodUSA, “Parties”). 2 Additionally, Applicants seek approval of the transfer of of McLeodUSA- DIP back to McLeodUSA. This Restructuring is currently anticipated to take place by November 28, 2005. 3 1 47 C. F. R §§ 63.03, 63.04; see 47 U. S. C. § 214. 2 As part of the Restructuring, Parent and its wholly owned subsidiaries will each act as a debtor- in-possession (“ DIP”) in the Chapter 11 proceeding and a DIP credit facility in the amount of $50 million will be issued for working capital and general corporate purposes in accordance with approved budgets to assure that operations continue on an uninterrupted basis during the Restructuring. As with the existing credit facility, all of Parent’s wholly owned subsidiaries, including McLeodUSA, will act as guarantors and pledge all or substantially all of their assets to secure the DIP credit facility. This credit facility and the associated security interests will be refinanced with the proceeds of the exit facility described in the application. 3 Applicants are also filing applications for transfer of control associated with authorization for international services. Any action on this domestic 214 application is without prejudice to Commission action on other related, pending applications. 1 2 Applicants assert that this transaction is entitled to presumptive streamlined treatment under section 63.03( b)( 2)( i) of the Commission’s rules because immediately following the Restructuring: (1) McLeodUSA will hold less than a 10 percent share of the interstate, inteexchange market; (2) to the extent McLeod- USA provides U. S. local exchange services or exchange access services, those services are provided only in geographic areas served by a dominant local exchange carrier that is not a party to the Restructuring; and (3) non of the Applicants or their affiliates are dominant with respect to any U. S. domestic telecommunications service. 4 The Restructuring that will transfer McLeodUSA- DIP to McLeodUSA will be purely financial, in which certain secured creditors will become the shareholders of Parent and existing equity in Parent will be extinguished. 5 The Restructuring will enable McLeodUSA’s current operations to continue without interruption or any changes to the rates, terms and conditions of the services that its customers currently receive. The financial Restructuring is part of a plan of reorganization (the “Plan”) that has been agreed upon by the Parent and a majority of its secured creditors. Parent is currently soliciting creditor votes on the Plan consistent with the Bankruptcy Code, and intends to file the Plan with the United States Bankruptcy Court for the Northern District of Illinois (the “Bankruptcy Court”) on or around October 28, 2005, upon completion of the solicitation process, thereby commencing the Chapter 11 proceedings. The “pre- packaged” Plan will enable McLeodUSA to continue current operations without interruption or any changes in the rates, terms or conditions of the services that its customers currently receive. The consensual Plan will protect unsecured creditors and enable the Parties to emerge from Chapter 11 as soon as possible. Following emergence, the Applicants will file consummation notice with the Commission. McLeodUSA, an Iowa corporation, provides integrated communications services, including local services, primarily in 25 Midwest, Southwest, Northwest, and Rocky Mountain States. McLeodUSA is a wholly owned subsidiary of McLeodUSA Holdings, Inc., which, in turn, is a wholly owned subsidiary of Parent. Direct ownership of McLeodUSA will not change. Precise equity ownership of Parent will not be known until the Company emerges, however, the new shareholders will be major institutional investment companies, and Applicants do not expect that any single entity or group of entities will hold 50% or more of the stock of the Parent and, thereby, no entity will hold more than a 50% indirect share of McLeodUSA. Specifically, the following entities will own or control 10 percent or greater equity/ voting interest in Parent and therefore are anticipated to be the five largest indirect owners of McLeodUSA following the Restructuring: (1) Fidelity Investments (31.25 percent), a U. S. entity; and Wayzata Investment Partners LLC (15.41 percent), a U. S. entity. The 31.25 percent interest to be held by Fidelity Investments is held by several individual investment funds. Fidelity Adv Ser: Adv. High Income 4 47 C. F. R. § 63.03( b)( 2)( i). 5 Under the Plan, all equity interests in Parent will be extinguished, including the 58% majority share of the equity interest in Parent currently held by various partnerships and investment funds controlled or managed by Forstmann Little & Co. 2 5 (2) Tracey Wilson- Parker, Competition Policy Division, Wireline Competition Bureau, 445 12 th Street, S. W., Room 5- C212, Washington, D. C. 20554; email: tracey. wilson- parker@ fcc. gov; (3) Erin C. Boone, Competition Policy Division, Wireline Competition Bureau, 445 12 th Street, S. W., Room 5- B155, Washington, D. C. 20554; e- mail: erin. boone@ fcc. gov; (4) Susan O’Connell, Policy Division, International Bureau, 445 12 th Street, S. W., Room 7- B544, Washington, D. C. 20554; email: susan. o’connell@ fcc. gov; and (5) James Bird, Office of General Counsel, 445 12 th Street, S. W., Room 8- C824, Washington, D. C. 20554; e- mail: james. bird@ fcc. gov. Filings and comments are also available for public inspection and copying during regular business hours at the FCC Reference Information Center, Portals II, 445 12th Street, SW, Room CY- A257, Washington, DC, 20554. They may also be purchased from the Commission’s duplicating contractor, Best Copy and Printing, Inc., Portals II, 445 12th Street, SW, Room CY-B402, Washington, DC 20554, telephone: (202) 488- 5300, fax: (202) 488- 5563, or via e- mail www. bcpiweb. com. For further information, please contact Tracey Wilson- Parker, at (202) 418- 1394, or Erin Boone at (202) 418- 0064. - FCC - 5