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Many have tried, but only a few have succeeded. McLeodUSA Inc. joins a very short list of telecom companies that have successfully escaped from the trenches of bankruptcy protection proceedings.

The CLEC's security holders approved an amended reorganization plan, calling for McLeodUSA to distribute $670 million in cash to its senior noteholders. These noteholders will receive new preferred series A stock and warrants. As part of the deal, McLeodUSA also will distribute new common stock to its old preferred shareholders. The company's stock will resume trading on the Nasdaq today — trading was halted on January 30. The stock last traded at 18 cents a share.

Buyout firm Fortsmann Little & Co. has upped its equity investment commitment to $175 million in exchange for a 23 percent stake of the reorganized CLEC. Including the preferred stock stake it already holds, Fortsmann has increased its stake in the company to 58 percent, making it the largest McLeodUSA shareholder.

McLeodUSA also entered a five-year revolving credit facility valued at $110 million. JP Morgan Chase, Bank of America and Citibank lead the bank group.

Earlier this year, the CLEC agreed to sell its directories business to Yell Group for $600 million. It also closed a deal with Level 3 Communications to shed some of its non-core assets. Under the terms, Level 3 purchased 350 points of presence across the United States and the related facilities, equipment and underlying circuits.

McLeodUSA is following in the footsteps of DSL carrier Covad Communications, which successfully emerged from Chapter 11 bankruptcy proceedings in December after filing a pre-negotiated plan of its own in August.

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