McLeodUSA touts positive financial outlook

Dipping further into its credit facility and selling off PCS licenses, McLeodUSA assured investors today it has secured enough cash to see it through 2003, when the company hopes to be free cash-flow positive.

McLeod announced it has accessed another $175 million from its $1.3 billion secured credit facility, leaving it an undrawn balance of $550 million out of total $1.3 billion. The CLEC also has sold unused D-and E-block PCS licensed for $90 million, and it expects to garner more than $30 million when the sale is final. McLeod paid $30 million for licenses in 1997.

“Coupled with our cash on hand and our ability to access additional cash as needed under our Secured Credit Facility, we continue to operate a funded plan through free cash flow in 2003,” President and Co-CEO Steve Gray said in a statement. “This management team remains absolutely committed to meeting the objectives we have established, including increasing investor value over the long term. We intend to maximize our cash flow, continue solid growth in a challenging market, and manage through tough industry conditions.”

Last May, the company cut its capital expenditures for the next two years by $400 million, deciding to concentrate on building out its 25 state local exchange markets instead of expanding.

McLeod Chief Financial Officer J. Lyle Patrick said, with the capital costs revisions, the company needs approximately $1.4 billion to $1.5 billion to cover fixed costs until the second half of 2003, when the company anticipates becoming free cash-flow positive. The PCS license sales and the line of credit will provide the cash, and, if the financial markets improve, McLeod hopes to issue more shares instead of draining its entire credit facility, Patrick said.