Bids on McLeodUSA's bank debt have dropped more than 15 points into the 53-57 range after the competitive telecommunications service provider disclosed disappointing earnings earlier this month. It could not be determined if there were any trades at these levels. The debt being quoted is a $575 million "B" loan that has a LIBOR plus 3% spread.
McLeod reported a net loss of $91.4 million for the first quarter, compared to a net loss of $84 million a year earlier. Additionally, the company reported total revenues of $193 million compared to around $226 in the first quarter of 2003. McLeod attributed this decline in revenue to a reduction in the number of its customers. According to McLeod's most recent 8-K filing, revenues have been declining since the company filed for Chapter 11 bankruptcy in 2002. A McLeod spokesman did not return calls.
McLeod also has a $110 million revolver led by J.P. Morgan, Bank of America and Citibank. The company recently obtained amendments to the credit including changes to the minimum revenue, leverage ratio and interest coverage ratio covenants. There is no minimum revenue covenant in 2005 and the leverage ratio was replaced with a minimum cumulative EBITDA covenant. The capital expenditure limits for 2004 and 2005 were revised downwards to $75 million and $100 million, respectively. The lender group was paid $1.9 million in connection with the amendment. Forstmann Little & Co. is McLeod's principal shareholder.