McLeod Emerges From Chap. 11

CEDAR RAPIDS, Iowa -- McLeodUSA Incorporated announced today that its Joint Prepackaged Plan of Reorganization (the "Plan") became effective on Friday, January 6, 2006, and that the Company has emerged from Chapter 11. As previously reported, McLeodUSA's Plan was approved by the United States Bankruptcy Court for the Northern District of Illinois on December 16, 2005, after having received the affirmative vote of more than 90 percent of the creditors who voted on the Plan.

The Company also announced that it has named Royce J. Holland as the Company's new Chief Executive Officer. Mr. Holland brings more than 30 years experience in the telecommunications, energy and engineering/construction industries to McLeodUSA. Most recently, Mr. Holland was co-founder, Chairman and CEO of Allegiance Telecom, Inc., an integrated telecommunications services provider active in 36 major metropolitan areas across the USA. Allegiance was acquired by XO Communications in 2004. Previously, Mr. Holland was President and a co-founder of MFS Communications Company, Inc., one of the country's first competitive local exchange carriers, with operations in 52 metropolitan areas in North America, Europe and Asia. Founded in 1988, MFS was acquired by WorldCom in 1996.

Effective upon today's emergence, the Company has also named a new Board of Directors. In addition to Mr. Holland, the members of the new Board are: John Hank Bonde, Donald C. Campion, Eugene Davis, John D. McEvoy, Alex Stadler and D. Craig Young.

Under the terms of the Plan, the Company has significantly deleveraged its balance sheet by eliminating approximately $677 million in debt, plus interest, and reducing its annual interest expense by over $50 million. The Company's remaining debt was reduced to approximately $73 million using proceeds from the recent sale of the Company's headquarters facility. As of the effective date of the Plan, the Company has debt outstanding, net of available cash, of approximately $50 million. McLeodUSA also has entered into a new credit facility that provides the Company with access to an additional $50 million, comprised of a $40 million dollar revolving credit facility and a new $10 million term loan.

"This is an important day for McLeodUSA," said Stan Springel, Chief Restructuring Officer. "The Company has substantially strengthened its balance sheet and significantly reduced liabilities by over $677 million. Our new $50 million credit facility will provide continued assurance to our customers, employees and vendors about our strong liquidity position."

"It is a testament to our employees, customers and vendors, and their continued confidence in our business, that we were able to emerge from bankruptcy in only ten weeks, without disruption and while continuing to pay our trade creditors in full," added Joe Ceryanec, the Company's acting Chief Financial Officer.

Royce Holland, the Company's new Chief Executive Officer, added further, "I am extremely happy to be joining McLeodUSA at this time. I believe that the Company's new financial structure, coupled with its strong suite of products and high quality service, leaves us well-positioned for success."

Consistent with the Plan, McLeodUSA's former Preferred and Common Stock has been cancelled, and the Company's stock will no longer be publicly traded.

McLeodUSA Inc. (Nasdaq: MCLD)