McLeodUSA Again Files for IPO

McLeodUSA Inc. plans to once again go public.

The CLEC on March 22 filed to sell stock worth up to $172.5 million. The company deregistered from the Nasdaq about a year ago, after its second bankruptcy. Now it proposes to trade on the Nasdaq Global Market under the new ticker symbol MUSA. The previous symbol was MCLD.

McLeodUSA, a facilities-based carrier in Cedar Rapids, Iowa, sells IP voice and data services to businesses, directly and wholesale, in 20 states. It emerged from bankruptcy in January 2006, with a new CEO (telecom vet Royce Holland), board of directors and equity ownership. Thats when it also shifted its focus from offering T-1 services to converged voice and data, although it still provides POTS lines.

Over the past year, the company noted in a March 22 filing with the Securities and Exchange Commission, it has honed in on the SME segment and multilocation customers, a strategy it expects to net more loyal customers and higher revenue. The company also is relying more heavily on indirect channel partners.

The carrier intends to use some of the proceeds from the IPO to pay off debt, expand its IP platform and possibly to fund M&A.

There are risks involved in the proposed IPO.

As McLeodUSA notes in its SEC filing, We have never been profitable and we may not be profitable in the future. In 2006, the company recorded a net loss of $28.3 million, but that was a substantial improvement over the two previous years. We have only recently generated sufficient cash flow from operations to fund our expenses and may not continue to do so in the future, the company wrote.

It also faces image problems resulting from its two bankruptcies, meaning it could have a hard time convincing larger, more sophisticated business customers that we are now targeting, to purchase telecommunications services from us, the company said.

Still, McLeodUSA executives must see enough of a silver lining to warrant trading publicly again. McLeodUSA could not discuss what that might be, however, because it has entered the quiet period companies must adhere to while going public.

McLeodUSA Inc.

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