EXHIBIT 99.1
Press Release
McLeodUSA Incorporated
McLeodUSA Technology Park
6400 C Street SW PO Box 3177
Cedar Rapids, IA 52406-3177
Press and Investor Contact: Bryce E. Nemitz
Phone: 319-790-7800
Fax: 319-298-7767
bnemitz@mcleodusa.com
Web Site: www.mcleodusa.com
McLeodUSA and Forstmann Little Announce
Agreement for the Purchase of $1 Billion of
McLeodUSA Convertible Preferred Stock
Transaction Fully Funds McLeodUSA Plan Theodore Forstmann to Join McLeodUSA
Board of Directors
CEDAR RAPIDS, IOWA, AND NEW YORK, August 30, 1999 - McLeodUSA Incorporated
(Nasdaq/NMS: MCLD), one of the nation's fastest growing Integrated
Communications Providers (ICP), and Forstmann Little & Co., a New York-based
investment firm, today announced the signing of an agreement which will fully
fund the current McLeodUSA business plan.
Forstmann Little will invest approximately $1 billion in McLeodUSA in the form
of convertible preferred stock at a conversion price of $36.50 per share with a
3.5 percent coupon. Under the terms of the agreement, Forstmann Little may
convert to common stock after five years and McLeodUSA may call the security
after seven years. The investment represents ownership of approximately 12
percent of McLeodUSA fully diluted shares. Theodore J. Forstmann, senior partner
at Forstmann Little, will join the McLeodUSA Board of Directors. A second
Forstmann Little partner will be named to the Board within 30 days.
Clark E. McLeod, McLeodUSA Chairman and CEO, stated, "A long-term investment of
this magnitude can produce significant benefits for McLeodUSA and its
shareholders. This investment reduces our future financial risk because it fully
funds our current plan. It provides capital now which allows us to accelerate
our growth. It helps position us financially as a leader in an industry that is
beginning to consolidate. Finally with Teddy Forstmann joining our Board, it
allows us to partner with one of the pre-eminent private investor firms in the
nation."
"McLeodUSA clearly stands out as a leader in their industry," said Theodore J.
Forstmann. "We see a company with truly great leadership and great execution.
However, even more important, a company which is extremely well positioned for
significant future growth. Growth that can be achieved as consumers are offered
choice among telecommunications and Internet providers for the first time in an
industry controlled by monopolies for 100 years."
"When we search to partner with a company for investment opportunities,"
Forstmann added, "we look
at the industry, timing and people. The new McLeodUSA investment is in the right
industry, at the right time, and with a highly talented team. In addition, the
McLeodUSA team has a long-term perspective, which aligns with our investment
strategy."
McLeodUSA plans to use the proceeds of the investment for continued fiber optic
network development, the introduction of new and enhanced telecommunications and
data services, market share penetration in existing and new markets, and general
operating expenses.
Founded in 1978, Forstmann Little is a private investment firm that has invested
over $13 billion in 24 acquisitions, including Gulfstream Aerospace, General
Instrument, Ziff-Davis Publishing, Yankee Candle Company and Community Health
Systems. The firm currently has approximately $4 billion in committed capital
for future investments.
McLeodUSA is a provider of integrated communications services to business and
residential customers in 11 Midwest and Rocky Mountain states; ten additional
expansion states will be added. The Company offers local, long distance, data,
voice mail, paging, and Internet access. McLeodUSA is a facilities-oriented
communications provider with 16 switches, 8,500 route miles of fiber optics
network, 554,700 local lines, and 7,100 employees. In the next 12 months, the
Company's publishing subsidiaries plan to distribute over 22 million copies of
competitive directories in 22 states, expected to reach over 36 million people.
Some of the statements contained in this news release discuss future
expectations, contain projections of results of operations or financial
condition or state other forward-looking information. Those statements are
subject to known and unknown risks, uncertainties and other factors that could
cause the actual results to differ materially from those contemplated by the
statements. The "forward-looking" information is based on various factors and
was derived using numerous assumptions. In some cases, you can identify these
so-called forward-looking statements by words like "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential," or "continue" or the negative of those words and other comparable
words. You should be aware that those statements only reflect the predictions of
McLeodUSA. Actual events or results may differ substantially. Important factors
that could cause actual results of McLeodUSA to be materially different from the
forward-looking statements include availability of financing and regulatory
approvals, the number of potential customers in a target market, the existence
of strategic alliances or relationships, technological, regulatory or other
developments in the industry, changes in the competitive climate in which
McLeodUSA operates and the emergence of future opportunities. These and other
applicable risks are summarized under the caption "Risk Factors" in the
McLeodUSA Annual Report on Form 10-K for the fiscal year ended December 31,
1998, which is filed with the Securities and Exchange Commission.
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