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 approved the change of control of its wireless licenses. This clears the way for Leap to emerge from bankruptcy and the company has said that should occur next week.
“Obtaining the FCC's order approving the transfer of control of our licenses represents a significant milestone in our emergence process,” said Bill Freeman, ceo of Leap in a statement.
But growing unemployment numbers hindered the bank debt rally. Once the unemployment number came out, the levels went back down to the 119-121 context under perceived equity weakness, a dealer explained. “[Leap] trades exactly like the equity,” the trader said, and noted there is “reignited interest on the name now that the reemergence is so close.” But he stated it is difficult to know if Leap’s debt will be able to reach the 140-150 levels it was expected to before MetroPCS Communications delayed IPO reversed the company’s debt rally (LMW, 8/2).
“People might be hesitant. It’s certainly positive news but people keep counting on the equity market. As long as the equity market [stays] weak, Leap will [stay] volatile at these levels.” Leap’s investors, who have about $1.6 billion in outstanding claims, are slated to receive 96 1/2% of the equity in the reorganized company. Upon the company’s emergence from bankruptcy, its long-term debt will be reduced from more than $2.4 billion to approximately $390 million. On emergence, Leap will issue $350 million in senior secured pay-in-kind notes.