Exhibit 99.1

                  McLeodUSA Announces Extension of Forbearance
                             Agreement with Lenders

         o Company focused on capital restructuring
         o No recovery expected for preferred or common stockholders


CEDAR RAPIDS, Iowa - July 21, 2005 - McLeodUSA Incorporated, one of the
nation's largest independent, competitive telecommunications services
providers, today announced that the Company and its Lenders have agreed to
extend until September 9, 2005 the forbearance agreement initially entered into
on March 16, 2005 and previously extended to July 21, 2005. Under the terms of
the forbearance agreement, the Lenders continue to agree not to take any action
as a result of non-payment by the Company of certain principal and interest
payments due on or before September 9, 2005 or any related events of default
that occur through September 9, 2005.

As previously announced, the Company has been exploring a capital restructuring
with its lenders while also attempting to identify a potential strategic
partner or buyer. At this time, the Company has concluded that there is not an
acceptable strategic partner or buyer and is proceeding to work with its
Lenders to complete a capital restructuring where its lenders would convert a
substantial portion of their debt to equity and become the majority
stockholders of the Company. The parties agreed to extend the forbearance
agreement through September 9, 2005 to further prepare for the capital
restructuring. There can be no assurances that the Company will be able to
reach an agreement with its lenders regarding a capital restructuring on terms
and conditions acceptable to the Company prior to the end of the forbearance
period.

While the Company continues to explore with its lenders a capital
restructuring, none of the alternatives presented to date have suggested that
there will be any recovery for the Company's current preferred stock or common
stockholders. Accordingly, the Company does not expect its preferred stock or
common stock to receive any recovery in a capital restructuring.

The Company believes that by not making principal and interest payments on the
credit facilities, cash on hand together with cash flows from operations are
sufficient to maintain operations in the ordinary course without disruption of
services. The Company does not expect the exploration of the capital
restructuring to negatively impact its customers or suppliers. The Company
remains committed to continuing to provide the highest level of service to its
customers and to maintaining its strong supplier relationships.

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 March 31,
2005, 38 ATM switches, 39 voice switches, 699 collocations, 432 DSLAMs and
approximately 2,300 employees. 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 may include projections of financial and operational results and
goals, including revenue, EBITDA, Adjusted EBITDA, profitability, savings and
cash. 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" or
"potential" or the negative of those words and other comparable words. 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. Factors that could cause actual results to differ
materially from the forward-looking statement include technological,
regulatory, public policy or other developments in our industry, availability
and adequacy of capital resources, our ability to continue as a going concern,
our ability to implement a strategic transaction or a capital restructuring,
current and future economic conditions, the existence of strategic alliances,
our ability to generate cash, our ability to implement process and network
improvements, our ability to attract and retain customers, our ability to
migrate traffic to appropriate platforms and changes in the competitive climate
in which we operate. These and other risks are described in more detail in our
most recent Annual Report on Form 10-K filed with the SEC. The Company
undertakes no obligation to update publicly any forward-looking statements,
whether as a result of future events, new information or otherwise.

Contact:
McLeodUSA Incorporated, Cedar Rapids, IA
Investor Contact: Bryce Nemitz
Press Contact:    Bruce Tiemann
Phone:  (319) 790-7800