**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]

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 Advtg will hold a 16.38 percent
indirect interest in McLeodUSA. No other investment funds will hold or
control an indirect 10 percent or greater interest in McLeodUSA. No
entity will own or control an interest in Fidelity Adv Ser II:Adv.High
Income Advtg that will give them an indirect 10 percent or greater
interest in McLeodUSA.

McLeodUSA states that the proposed Restructuring serves the public
interest because it will increase competition in the United States
telecommunications market by reinvigorating McLeodUSA as a viable
competitor, and because it will preclude any disruption of service that
might otherwise result from the Parties' financial condition. Moreover,
given that the Restructuring will not directly affect McLeodUSA's rates,
terms and conditions of service, it will not negatively impact
customers. Customers of McLeodUSA will continue to receive service from
the same company under the same rates, terms and conditions of service
that those customers currently receive.

**[GENERAL INFORMATION]{.underline}**

The transfer of control identified herein has been found, upon initial
review, to be acceptable for filing as a streamlined application. The
Commission reserves the right to return any transfer of control
application if, upon further examination, it is determined to be
defective and not in conformance with the Commission's rules and
policies. Pursuant to sections 1.415 and 1.419 of the Commission's
rules, 47 CFR §§ 1.415, 1.419, interested parties may file **comments on
or before November 10, 2005** and **reply comments on or before November
17, 2005**.[^6] Unless otherwise notified by the Commission, Applicants
are permitted to transfer the assets and related control on the 31^st^
day after the date of this notice.[^7] Comments may be filed using: (1)
the Commission's Electronic Comment Filing System (ECFS), (2) the
Federal Government's eRulemaking Portal, or (3) by filing paper copies.
*See Electronic Filing of Documents in Rulemaking Proceedings*, 63 FR
24121 (1998).

-   Electronic Filers: Comments may be filed electronically using the
    Internet by accessing the ECFS: <http://www.fcc.gov/cgb/ecfs/> or
    the Federal eRulemaking Portal:
    [http://www.regulations.gov](http://www.regulations.gov/). Filers
    should follow the instructions provided on the website for
    submitting comments.

-   For ECFS filers, if multiple docket or rulemaking numbers appear in
    the caption of this proceeding, filers must transmit one electronic
    copy of the comments for each docket or rulemaking number referenced
    in the caption. In completing the transmittal screen, filers should
    include their full name, U.S. Postal Service mailing address, and
    the applicable docket or rulemaking number. Parties may also submit
    an electronic comment by Internet e-mail. To get filing
    instructions, filers should send an e-mail to <ecfs@fcc.gov>, and
    include the following words in the body of the message, "get form."
    A sample form and directions will be sent in response.

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-   Paper Filers: Parties who choose to file by paper must file an
    original and four copies of each filing. If more than one docket or
    rulemaking number appears in the caption of this proceeding, filers
    must submit two additional copies for each additional docket or
    rulemaking number.

Filings can be sent by hand or messenger delivery, by commercial
overnight courier, or by first-class or overnight U.S. Postal Service
mail (although we continue to experience delays in receiving U.S. Postal
Service mail). All filings must be addressed to the Commission's
Secretary, Office of the Secretary, Federal Communications Commission.

The Commission's contractor will receive hand-delivered or
messenger-delivered paper filings for the Commission's Secretary at 236
Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The filing
hours at this location are 8:00 a.m. to 7:00 p.m. All hand deliveries
must be held together with rubber bands or fasteners. Any envelopes must
be disposed of [before]{.underline} entering the building. Commercial
overnight mail (other than U.S. Postal Service Express Mail and Priority
Mail) must be sent to 9300 East Hampton Drive, Capitol Heights, MD
20743. U.S. Postal Service first-class, Express, and Priority mail
should be addressed to 445 12^th^ Street, SW, Washington DC 20554.

People with Disabilities: To request materials in accessible formats for
people with disabilities (braille, large print, electronic files, audio
format), send an e-mail to <fcc504@fcc.gov> or call the Consumer &
Governmental Affairs Bureau at 202-418-0530 (voice), 202-418-0432 (tty).

**You may submit comments, identified by the above noted docket number,
by any of the following methods:**

-   Federal eRulemaking Portal:
    [http://www.regulations.gov](http://www.regulations.gov/). Follow
    the instructions for submitting comments.

-   Federal Communications Commission's Web Site:
    <http://www.fcc.gov/cgb/ecfs/>. Follow the instructions for
    submitting comments.

-   People with Disabilities: Contact the FCC to request reasonable
    accommodations (accessible format documents, sign language
    interpreters, CART, etc.) by e-mail: <FCC504@fcc.gov> or phone:
    202-418-0530 or TTY: 202-418-0432.

**In addition, one copy of each pleading must be sent to each of the
following:**

(1) The Commission's duplicating contractor, Best Copy and Printing,
    Inc., 445 12th Street, SW, Room CY-B402, Washington, DC 20554,
    [www.bcpiweb.com;]() phone: (202) 488-5300 fax: (202) 488-5563;

(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](mailto:adam.kirschenbaum@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](mailto:cynthia.bryant@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](http://www.bcpiweb.com/).

For further information, please contact Tracey Wilson-Parker, at (202)
418-1394, or Erin Boone at (202) 418-0064.

\- **FCC** -

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[^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.

[^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.

[^6]: *See* 47 C.F.R. § 63.03(a).

[^7]: Such authorization is conditioned upon receipt of any other
    necessary approvals from the Commission in connection with the
    proposed transaction.