Moody's may cut McLeodUSA

Moody's Investors Service said it placed the debt ratings of McLeodUSA Inc. on review for possible downgrade following the company's failure to make scheduled principal and interest payments in March and its announcement that it is in negotiations with members of its lender group with regard to a capital restructuring.

On review are McLeod's Caa3 senior implied rating, Caa3 rated $150 million senior secured revolving credit facility due 2007, $150.8 million senior secured multi-draw term loan A due 2007 and $376.5 million senior secured term loan B due 2008 and its Ca senior unsecured issuer rating.

Moody's said the review will focus on near-term liquidity, recovery prospects for bank lenders and the likely conversion of bank debt to equity and the potential that the company may again need to seek bankruptcy protection in the longer term.

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