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| William Freeman |
Leap Wireless International affiliate Cricket Communications is planning to slash interest costs by installing a new $650 million senior secured credit facility to redeem $350 million of 13% senior secured notes. "This is a very strong market for debt," said William Freeman, ceo of Leap, which emerged from bankruptcy last August after filing for Chapter 11 in April 2003.
The proposed credit facility will be led by Bank of America, Goldman Sachs and Credit Suisse First Boston. "When we looked at who we were going to select, we looked for the [banks] that were going to offer the best services and rates. These are the strongest within the market," he stated. The debt is expected to include a six-year, $500 million term loan and five-year, $150 million revolver. Pricing has not yet been determined.
Leap filed for bankruptcy with over $2.4 billion in balance sheet debt obligations including $1.6 billion in vendor claims originally held by Ericsson, Nortel Networks, Qualcomm and Lucent Technologies. The telecom equipment companies sold the debt in the low teens and the paper then climbed to over 120. Upon emergence there were approximately 100 debt holders, including Highland Capital Management and MHR Fund Management, which have seats on Leap's board (LMW, 9/20). This debt was converted into equity with senior secured debt holders receiving 96.5% of the company's equity as well as the $350 million of senior secured notes. Leap will pay approximately $42 million on the notes to reflect a 106.5% call premium and accrued interest.
In addition, Leap will pay $41 million to the Federal Communications Commission as part of negotiated terms set in place during reorganization to change control of its wireless licenses. The term loan will also provide the company with $57 million for working capital and to purchase spectrum in Fresno, California. "We will be prudent in how we plan to grow and increase our business," said Freeman.
"This is a very stable company with positive indications for the future," said Marcus Jones, v.p. and senior credit officer at Moody's Investors Service, which rates the proposed bank debt B1. Leap offers wireless services in 20 states and has 1.55 million subscribers.
