Leap Amends Vendor Financing Agreements to Change Covenants
SAN DIEGO, Mar 28, 2002 /PRNewswire-FirstCall via COMTEX/ -- Leap Wireless
International, Inc. (Nasdaq: LWIN), an innovator of wireless communications
services, today announced that its wholly owned subsidiary, Cricket
Communications, Inc. (Cricket), has amended its vendor financing agreements with
Ericsson (Nasdaq: ERICY), Lucent Technologies (NYSE: LU) and Nortel Networks
(NYSE: NT; TSE). The amendments change certain covenants to provide greater
flexibility to Leap throughout the remainder of this year and next as it adds
new customers and completes the buildout of networks in its 40 Market Plan. All
three vendor financing agreements have been amended in substantively the same
manner.
"We are pleased that our vendors and lenders have again shown support for our
business in difficult times for vendor financing in the telecommunications
industry," said Harvey P. White, Leap's chairman and CEO. "We are changing how
many Americans live their lives by bringing them a service that combines the
best of landline telephony with the freedom and mobility that only wireless
service can provide. These amendments bring our loan covenants into alignment
with our current business plan, which is larger in scope than envisioned when
these agreements were originally put into place. With these amendments, we
believe that we have the flexibility to grow our business in a fashion that we
believe will best maximize shareholder value."
The amendments delay the effect of the consolidated EBITDA to cash interest
expense covenant so that it is now first measured at March 31, 2003. The minimum
ratios required by this covenant at each quarter end have not changed. The
amendments also limit the measurement of the total indebtedness to annualized
EBITDA covenant to the last day of each fiscal quarter and now require a ratio
of total debt to annualized EBITDA no greater than 10.0 to 1.0 on the covenant's
first measurement date, June 30, 2003. The remaining maximum permitted ratios
remain unchanged. In addition, the amendments increase the maximum capital
expenditures that Cricket is allowed to make in 2002 by $60 million to
accommodate additional capital expenditures, if necessary.
Because the amendments delay the initial measurement of the EBITDA covenants
discussed above, Cricket agreed to a new minimum consolidated EBITDA covenant
that requires EBITDA of not less than negative $27 million, $0 and positive $9
million at the end of the second, third and fourth fiscal quarters of 2002,
respectively, and positive $45 million at the end of the first fiscal quarter of
2003. The EBITDA covenants, as amended, generally measure consolidated
performance of Cricket Communications, its subsidiaries and the subsidiaries of
Leap formed to hold wireless licenses used in Cricket's business.
"Under our current business plan, we expect to meet these and all other vendor
loan covenants through the end of 2003. We will, however, need to refinance or
amend our vendor facilities or raise additional capital prior to January 2004 to
meet our debt to equity covenant in January 2004," said Susan G. Swenson, Leap's
president and chief operating officer. "Our results are a tribute to the
dedication and hard work put forth by the entire Leap team. I look forward to
the continued demonstration of how our Cricket business model is different from
PCS and cellular carriers in the coming quarters. We expect customer growth in
our 40 Market Plan to remain strong as we continue to focus on reducing costs,
streamlining processes, improving operational efficiencies and increasing
customer retention."
Leap also agreed to pledge as collateral under the vendor financing agreements
substantially all of the wireless operating licenses owned by Leap and its
subsidiaries that have not previously been pledged as security for the vendor
financing. The pledge of these licenses will cause the aggregate book value of
licenses pledged as collateral under these agreements to increase by
approximately $50 million.
Under the Company's forecasts and business plan, Leap planned to invest
approximately $171 million in its Cricket business over the next 18 months. This
investment would allow Cricket to meet its debt to equity covenant as of Dec.
31, 2002 and meet its payment obligations to the Federal Communications
Commission (FCC) in 2002 and 2003 from current resources. Under the amendments,
Leap agreed to set aside, or invest in Cricket and subsidiaries conducting
Cricket business, $111 million now and approximately $60 million additional as
Leap raises cash in the future. On March 27, 2002, the FCC announced that it
will return to Leap approximately $60 million of the $70 million that the
Company currently has on deposit with the FCC. Under the amendments,
approximately $25 million of the refunded amount can be retained by Leap to be
used for general corporate purposes, and the balance of $35 million will be
invested in Cricket and subsidiaries conducting Cricket business. The remaining
$25 million of the $60 million obligation is expected to come from activities
such as the sale of newly pledged licenses or the sale of Pegaso. As additional
consideration, Cricket paid amendment fees of approximately $6 million dollars
to its lenders.
Cricket also agreed to amend its equipment purchase agreement with Nortel
Networks. Nortel Networks has agreed to accept purchase orders from Cricket in
the same manner that it accepts purchase orders from other customers up to a
total of $234 million, which is approximately the amount of the cumulative
purchase orders that Leap expects to tender for purchase from Nortel Networks
from August 2000 through the end of 2002. Nortel Networks may, in its
discretion, accept or reject purchase orders in excess of $234 million. Nortel
Network's financing commitment remains in place for purchase orders it accepts
and for certain third party costs and capitalized interest.
Leap pioneered Cricket service, a flat-rate, all-you-can-talk local wireless
service focused on the mass consumer market. Leap currently offers Cricket
service in 40 markets covering approximately 25.2 million potential customers
(2001 POPs) in 20 states from New York to California.
SOURCE Leap Wireless International, Inc.
Copyright (C) 2002 PR Newswire. All rights reserved. |
