McLeodUSA to Sell Unit to Britain-based Yell

McLeodUSA Inc., a western U.S. local phone and Internet-services company trying to avert bankruptcy, agreed to sell its directory-publishing unit to Britain-based Yell Group Ltd. for $600 million.

McLeodUSA, about 20%-owned by Forstmann Little & Co., said it ended a Dec. 3 agreement to sell the unit to the private investment firm for $535 million. Forstmann had agreed not to charge a breakup fee if McLeodUSA found a better offer. Yell is Britain’s biggest phone-directory publisher.

Stephen Gray, McLeodUSA’s chief executive, has been cutting jobs, selling assets and abandoning plans to build a national U.S. network to cope with slumping demand for communications services. The company said last month that it might have to file for bankruptcy if bondholders wouldn’t agree to exchange $2.9 billion in debt for stock and cash, funded from the sale of the directory unit.