Shares closed up 39 cents, or 14 percent, to $3.12 following the news.
The company still has more than $550 million in credit available and expects the proceeds from the sales of PCS wireless telephone licenses to contribute another $120 million this year.
"We intend to maximize our cash flow, continue solid growth in a challenging market, and manage through tough industry conditions," Co-Chief Executive Steve Gray said in a statement. "This management team remains absolutely committed to meeting the objectives we have established, including increasing investor value over the long term."
In early May, McLeodUSA scaled back sales estimates for the fiscal year from $2.1 billion to between $1.95 billion and $2 billion and chopped its capital spending budget for the next two years by $300 million to $1.15 billion in response to pricing pressures and canceled orders.
On Tuesday, Merrill Lynch analyst Ken Hoexter reiterated his intermediate-term "neutral" and long-term "buy" ratings on the stock.
Thirteen of the 19 analysts tracking the stock maintain either a "buy" or "strong buy" recommendation.
Last quarter, the company posted a loss of 31 cents a share on sales of $433 million.
Analysts expect it to report a second-quarter loss of 33 cents a share on sales of $472.5 million.
McLeodUSA shares soared to a 52-week high of $25.13 last July before plunging to a low of $2.18 in June.