Leap Wireless International's vendor-financing paper has traded up as the company winds up bankruptcy proceedings. A $13-15 million piece of the loan was auctioned off two weeks ago this Friday in the 42-44 range, said traders. The seller was said to be one of the original holders of the paper. Last year about $300-400 million of this paper changed hands as low as the high teens (LMW, 11/02). The vendor-financing debt has since been slowly creeping up, particularly over the last month. The company should emerge from bankruptcy soon, financial results have been improving, and Leap is closing under-performing markets, which frees up spectrum that can be sold, one investor said.
Leap has entered into an agreement with Edge Acquisitions to sell two Idaho spectrum licenses for $3.25 million, said Jim Seines, Leap's director of investor relations and public affairs. Leap acquired these licenses in 1999 through participation in a Federal Communications Commission auction for a total of $133,000, he added. Due to the bankruptcy, the company must also solicit competitive bids through an auction process. The bids must be all cash and at least as favorable as the terms provided by Edge. Seines said the company may sell more spectrum in the future. "We look to maximize the value of the spectrum holdings that we have," he explained.
Vendor debt claim holders are slated to receive 96.5% of the new common stock in the reorganized company as well as new senior notes totaling $350 million. Under the worst case scenario, the paper could be worth 50 cents on the dollar, said one buysider. Last week the company received approval from the bankruptcy court for its plan of reorganization. Leap now intends to begin soliciting votes from its creditors. The company said in a written statement that it expects the plan to be approved at the confirmation hearing, which is scheduled to begin the week of Sept. 29.