Leap Wireless’ vendor claims continue their climb upward as market participants gain confidence in the company’s equity value. Some traders are predicting the debt could even reach 140. Leap’s debt traded in the 115 context yesterday up from the 108-109 context where it was trading a month ago. Today the wireless communications company’s debt level continued on its way up and pieces were said to be trading in the 120-121 range.
Speculation on the value of the equity that Leap’s debt holders will receive after the company emerges from bankruptcy has been driving the price upward. These investors, who have about $1.6 billion in outstanding claims, are slated to receive 96 1/2% of the equity in the reorganized company and about $350 million in new debt (LMW 5/3).
An initial public offering for MetroPCS Communications that was filed last Friday, pointed to higher potential valuation levels for Leap’s equity, a trader noted. Metro is also a wireless communications provider.
William Freeman, Leap’s newly appointed ceo, said, “The company’s basic fundamental metrics were very strong in the first quarter. That leads people to have a more optimistic outlook about the business.” He noted that Leap’s improvements are not a company-specific phenomenon and the whole market atmosphere seems to be favorable for other wireless providers. Freeman said that the key to Leap’s recovery has been a combination of both revenue generating and cost reduction actions. “We drove up our top line revenue [while] managing our costs down,” he noted.
Leap’s bankruptcy exit is now subject to the Federal Communications Commission controls (FCC) and is expected to occur in a matter of days or months. “The longer [the FCC decision] takes, the longer people speculate on the equity going up and giving more value to the loan,” a trader noted. Leap’s paper has been trading at increasingly higher levels since the paper moved above par in April. A year-and-a-half ago the company’s vendor claims were changing hands in the 17-18 range. Back in the day, Ericsson, Nortel Networks, Qualcomm and Lucent Technologies, Leap’s original debt holders sold it into distressed investors’ hands.