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Technology Stocks : Leap Wireless International (LWIN) -- Ignore unavailable to you. Want to Upgrade?

To: pcstel who wrote (1736)	3/13/2002 12:09:30 PM
From: Robert J. Irvin	Read Replies (2) \| Respond to of 2737

Thanks again! It looks like we're getting closer to cash flow requirements! Does this also mean that quarterly interest payments must be made (in cash)? Assuming fed funds and Libor rise, say, Libor 5.5%, would this mean interest of $30 million a quarter (10% interest to keep it simple, times $1.2 billion, divided by four), plus principal of $17 million, for total quarterly payments to Lucent of $47 million?? What about payments to Nortel and Ericcson? Do they start in the fourth quarter, or first quarter 03, or later?

To: pcstel who wrote (1736)	3/19/2002 1:32:08 PM
From: Robert J. Irvin	Read Replies (2) \| Respond to of 2737

Your reply regarding debt service got me foraging over at sec.gov. I am focusing on the Amended and Restated Lucent Credit Agreement attached to Leap's Sep 30, 2000 10Q and the First Amendment attached to Leap's Sep 30, 2001 10Q. I don't know how to copy them over here. Sorry. As I read the Lucent Credit Agreement, Leap must make principal payments of 2.5% of the principal borrowed, up from 1.25% in the 1999 Credit Agreement you copied. On $1.2 billion (actually a little less), this means principal payments of $30 million a quarter starting 12-31-02, increasing to $45 million at 12-31-03. But that's only half of it. Interest also must be paid, in cash, starting 12-31-02. So add a little less than $30 million each quarter, at 10% interest. There's a little more. $14 million interest must be paid, in cash, on Oct 15, 2003 on Leap's $225 million Senior Notes. For now this is being paid out of restricted cash and investments. And on Dec 31, 2003, Lucent ramps up from 2.5 to 3.75% of principal, while Nortel and Ericcson kick in. So starting Dec 31, 2002, there are plenty of uses for Harvey's predicted UFCF. More immediately, all three Credit Agreements have a Consolidated EBITDA to Cash Interest Expense test that starts Dec 31, 2002, looking back four quarters for EBITDA, in other words, starting this quarter. Given guidance of negative $78 million for 2002 EBITDA, this test can't be met. If this covenant isn't renegotiated by March 31, I would expect that Leap's auditors would be unable to give an opinion on its financial statements without a "going concern" qualification, not a great thing for the stock price. In short, I agree with you in spades that Leap's March quarter is critical, both to prove the business plan and for a gut check on the vendor financing. I will be very curious to see if the vendor finance facilities are paying any operating costs, if the $300 million capital spending budget is on plan, and if the business is on track.