Leap Higher As Bankruptcy Exit Approaches

Leap Wireless International's vendor paper moved up from the 115-117 range and traded above the 121 context last week after the Federal Communications Commission (FCC) approved the change of control of its wireless licenses.

  • 13 Aug 2004
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Doug Hutcheson

Leap Wireless International's vendor paper moved up from the 115-117 range and traded above the 121 context last week after the Federal Communications Commission (FCC) approved the change of control of its wireless licenses. This clears the way for Leap to emerge from bankruptcy and the company has said this should occur this week.

Upon emergence, senior secured debt holders will receive 96.5% of the equity in the reorganized company as well as $350 million in 13% pay-in-kind notes. The $350 million of bonds will act as the company's exit financing and could be refinanced with bank debt in the short term after the company evaluates, together with its bank group, all of its alternatives, said Doug Hutcheson, executive v.p. and cfo of Leap.

At the beginning of last week a trader noted some "reignited interest on the name now that the reemergence is so close." As soon as the company exits bankruptcy, Leap's debt will stop trading as it will be substituted by equity. Now Leap's old vendor claims will never reach the 140-150 levels the market expected to before MetroPCS Communications delayed IPO reversed the company's debt rally two weeks ago (LMW, 8/2). However, "maybe the shares will," a trader said.

The FCC decision almost closes out Leap's remarkable debt story. The paper started trading in the secondary market a couple of years ago when its vendor claims were sold in the low teens (11/3/02) by Ericsson, Nortel Networks, Qualcomm and Lucent Technologies, the company's original debt holders.

  • 13 Aug 2004

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