TECHNOLOGY : McLeodUSA Sells 12% Stake

McLeodUSA Inc. said that private investment firm Forstmann Little & Co. will invest $1 billion for a 12% stake in the local and long-distance telephone service provider. McLeodUSA said it will use the money to develop its fiber-optic network, introduce new telecommunications and data services, expand in new and existing markets, and for general operating expenses. New York-based Forstmann Little will receive McLeodUSA convertible preferred stock, at a price of $36.50 per share, with a 3.5% coupon. It may convert the shares to common stock after five years, and McLeodUSA may call the security after seven years. Shares of Cedar Rapids, Iowa-based McLeodUSA jumped on the news, gaining $1.13 to close at $32.75 on Nasdaq.