Exhibit 99.1


Mcleodusa Reaches Agreement With Bondholder Committee

Company Will Complete Previously Announced Recapitalization Plan to Reduce
Total Debt by $3.3 Billion Through a Pre-Negotiated Chapter 11 Filing

Plan Provides for No Disruption to Employees, Customers, Suppliers and
Overall Operations

CEDAR RAPIDS, Iowa - January 31, 2002 - McLeodUSA Incorporated, one of the
nation's largest independent competitive local exchange carriers, announced
today that it has signed lock-up agreements with the ad hoc committee of
holders of McLeodUSA senior notes ("bondholders") to support a
recapitalization of the Company. Under the terms of the recapitalization,
the bondholders will receive up to $670 million in cash, $175 million of
new preferred stock convertible into 15% of the reorganized Company's
common stock, and 5-year warrants to purchase an additional 6% of the
common stock for $30 million. The ad hoc committee, which holds 23% of the
bonds, voted unanimously in favor of the plan, which will eliminate
approximately $3.0 billion of bond debt.

Additionally, the Company has signed lock-up and support agreements with
stockholders holding approximately 45% of its Preferred Series A, Series D
and Series E shares, including funds managed by Forstmann Little & Co., to
support the recapitalization plan.

In order to complete this recapitalization as expeditiously as possible,
with the support of its Board of Directors, Secured Lenders, Forstmann
Little, the bondholders' ad hoc committee and certain of its preferred
stockholders, the Company today has filed a pre-negotiated plan of
reorganization through a Chapter 11 bankruptcy petition filed in the United
States Bankruptcy Court for the District of Delaware. The Chapter 11 case
includes only the parent company, McLeodUSA Incorporated. None of the
operating subsidiaries, which include McLeodUSA Telecommunications,
McLeodUSA Publishing and Illinois Consolidated Telephone Company (ICTC),
are part of the bankruptcy proceeding.

The recapitalization plan remains consistent with the plan announced by the
Company on December 3, 2001. The pre-negotiated elements of the transaction
provide for no disruption to the Company's employees, trade creditors,
customers and overall operations. The recapitalization is a key step in
positioning McLeodUSA for the future by giving the Company a much improved
capital structure. Specifically, under the terms of the proposed
reorganization:

     o     Holders of the Company's senior notes will receive their pro
           rata share of a cash payment in an amount up to $670 million.
           This cash payment will be funded by (i) $570 million of the $600
           million of aggregate proceeds to be received from the Company's
           previously announced agreement for the sale of its directory
           publishing business to Yell Group (subject to a price reduction
           of $200,000 per day if the transaction closes after April 30,
           2002, but prior to August 1, 2002); and (ii) $100 million in
           cash from a new equity investment of $175 million by Forstmann
           Little. Bondholders will also receive their pro rata share of
           (i) $175 million of new convertible preferred stock which is
           convertible into common stock representing 15% of the
           reorganized McLeodUSA common stock and which carries a
           cumulative dividend of 2.5% per annum and (ii) 5-year warrants
           to purchase an additional 6% of common stock for $30 million.

     o     The $175 million new equity investment in the Company by
           Forstmann Little will be in exchange for (i) approximately 23%
           of the reorganized McLeodUSA common stock and (ii) 5-year
           warrants to purchase an additional 6% of common stock for $30
           million.

     o     Forstmann Little's Series D and Series E preferred stock will be
           converted into common stock, representing approximately 35% of
           the reorganized McLeodUSA common stock.

     o     The Company's Series A preferred stock will be converted into
           approximately 10% of the reorganized McLeodUSA common stock.

     o     Holders of the Company's existing Class A common stock are
           expected to retain approximately 17% of the shares of the
           reorganized McLeodUSA common stock.

     o     Forstmann Little will be the largest shareholder of McLeodUSA
           after the recapitalization with an approximate 58% stake in the
           Company. Theodore J. Forstmann, Senior Partner of Forstmann
           Little, will continue as Chairman of the Executive Committee of
           the McLeodUSA Board of Directors.

     o     Clark E. McLeod will remain Chairman of the McLeodUSA Board of
           Directors, Stephen C. Gray will remain President and Chief
           Executive Officer, and Chris A. Davis will remain Chief
           Operating and Financial Officer of the Company.

During the bankruptcy proceedings, McLeodUSA expects to operate its
business in the ordinary course without interruption and with no impact on
its employees, customers and suppliers. The Company has approximately $140
million in cash currently available as of the date of the filing and has
secured a commitment for a $110 million exit financing facility from a
group of lenders arranged by JPMorgan, Bank of America and Citibank. This
exit revolver may be increased to as much as $160 million and will be
available to McLeodUSA at the completion of the recapitalization subject to
customary conditions. Accordingly, based on such cash availability, the
Company does not require and does not expect to obtain debtor-in-possession
financing.

The implementation of the pre-negotiated plan of reorganization is
dependent upon a number of conditions typical in similar restructurings
including, among other things, court approval of the pre-negotiated plan of
reorganization and related solicitation materials. Additional terms and
conditions of the reorganization plan will be outlined in a disclosure
statement which will be sent to security holders entitled to vote on the
plan of reorganization after it is approved by the Court.

The Company expects the pre-negotiated plan of reorganization to be
effective in the second quarter of 2002. In accordance with its policies,
the Nasdaq Stock Market may delist the Company's common stock and Series A
preferred stock as a result of the Company's filing under Chapter 11 of the
U.S. Bankruptcy Code. The Company intends to have its new common stock and
preferred stock listed on the Nasdaq Stock Market or another national
securities exchange upon completion of the reorganization.

As previously announced, the Company and its Secured Lenders amended their
existing $1.3 billion senior secured credit facility to permit the use of
proceeds from the sale of the publishing business to retire outstanding
bond debt in connection with the plan. The Company and its Secured Lenders
have also modified the credit agreement to allow the Company to retain and
use the proceeds from all currently identified future asset sales of
non-core businesses and surplus assets for general working capital purposes
in addition to capital expenditures. Subject to the consummation of the
plan of reorganization, the Company plans to eliminate $425 million of bank
debt by (i) a reduction of its current revolver commitment by $140 million,
(ii) a paydown of its term loan by $60 million ($35 million from the
Forstmann Little investment and $25 million from the directory publishing
proceeds), and (iii) offer for sale its regulated incumbent local exchange
subsidiary Illinois Consolidated Telephone Company (ICTC). The ICTC sale
process is expected to begin after the completion of the recapitalization
and occur within the subsequent 14 months, with up to $225 million of the
proceeds applied to reduce the Company's term loans.

About McLeodUSA:

McLeodUSA provides integrated communications services, including local
services, in 25 Midwest, Southwest, Northwest and Rocky Mountain states. The
Company is a facilities-based telecommunications provider with, as of
January 24, 2002, 31 ATM switches, 59 voice switches, 485 collocations, 525
DSLAMs, and over 31,000 route miles of fiber optic network. Visit the
Company's web site at www.mcleodusa.com.

Some of the statements in this press release include statements about our
future expectations. Statements that are not historical facts are
"forward-looking statements" for the purpose of the safe harbor provided by
Section 21E of the Exchange Act and Section 27A of the Securities Act. Such
statements include projections of financial and operational results and goals,
including revenue, EBITDA, profitability, savings and cash. These
forward-looking statements are subject to known as well as unknown risks and
uncertainties that may cause actual results to differ materially from our
expectations. Our expectations are based on various factors and assumptions
and reflect only our predictions and actual results may vary. In some cases,
you can identify these so-called "forward-looking statements" by our use of
words such as "may," "will," "should," "expect," "plan," "anticipate,"
"believe," "estimate," "predict," "project," "intend," "continue" or
"potential" or the negative of those words and other comparable words. You
should be aware that those statements only reflect our predictions. Actual
events or results may differ substantially. Important factors that could cause
actual events or results of McLeodUSA to be materially different from the
forward-looking statements include the ability of the Company to continue as a
going concern; court approval of the Company's first day papers and other
motions prosecuted by it from time to time; the ability of the Company to
develop, prosecute, confirm and consummate one or more plans of reorganization
with respect to the chapter 11 case (or any significant delay with respect
thereto); risks associated with third parties seeking and obtaining court
approval to terminate or shorten the exclusivity period for the Company to
propose and confirm one or more plans of reorganization, for the appointment
of a chapter 11 trustee or to convert the case to a chapter 7 case; the
ability of the Company to obtain trade credit, and shipments and terms with
vendors and service providers for current orders; the Company's ability to
maintain contracts that are critical to its operations; potential adverse
developments with respect to the Company's liquidity or results of operations;
the ability to fund and execute its business plan; the ability to attract,
retain and compensate key executives and associates; and the ability of the
Company to attract and retain customers; 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, 2000, which is filed with the
Securities and Exchange Commission.

Contact:

McLeodUSA Incorporated, Cedar Rapids, IA
Investor Contact: Bryce E. Nemitz
Press Contact: Bruce A. Tiemann
Phone: 319/790-7800
mcleodusa_ir@mcleodusa.com