Robert: I look forward to your input on total vendor financing outstanding at the end of 2002, or whenever the music stops. It may be shy of $1.85 billion, but I hope not by much.
Well, there is a limit to the maximum Capital Expenditure Limit on a Y/Y basis.
2000 $396 million
2001 $1,004 million
2002 $110 million plus the excess, if any, of (i) $1,004 million, minus (ii) the aggregate amount of capital expenditures made by Cricket and its subsidiaries in fiscal year 2001
2003 $180 million
2004 and thereafter $100 million
CapEx used in 2001 total ~777 million, which was ~50 million below budget. So that leaves 226 million carry over from 2001, and 110 million allowed this year for a maximum total of about 335 million. Harvey has said the CapEx budget is 300 million. So he is riding it right to the limit.
In 2003, there are a number of new covenants that start to come into effect. EBITDA to maximum debt ratios, et al.
My viewpoint is that Harvey needs to get this company to EBITDA positive As Soon As Possible. Use every penny of Lucent's VF amounts allowable. IMO, These old VF loans were thought of as nothing more than Bridge loans to get the business in the door. Once they were up and running. They equity markets or credit markets were overflowing. These companies would simply move these VF loans to better terms in the Credit Markets or Sale of Equity. Now Lucent is in a position to continue to fund new CapEx as per their agreements and face the fact that they may actually hold these loans through maturity! Which I don't think Lucent really wants. Especially since payments are weighted to the latter years like I have shown. In 2003. LWIN would be paying LU something like 80 million dollars? That's chump change for LU that can expect continued slow sales into the future. As represented by their recent sale of 1.75 billion in 15-year convertibles.
I think Harvey should bring us to EBITDA positive in Q3. Put a fresh coat of wax on the floors, and try and get something like 750 million in secured credit agreements in hand which is contingent on buying down the LU paper. Walk over to Lucent with 750 million and trade them 75 cents CASH on the dollar for our "debt"
So you max out the LU VF in the middle of 2002, and then find out how badly they can use the cash vs. long term paper!
IMO,
PCSTEL |
