NEW YORK-Omnipoint Communications Services Inc. secured a $750 million bank credit facility, enough to replace $516 million in existing vendor financing commitments and to cover its 1998 capital expenditure needs.
The eight-year senior secured term loan received speculative grade ratings of B2 and B+ from, respectively, Moody’s Investors Service and Fitch IBCA Inc., both headquartered in New York.
Moody’s expects the personal communications services carrier to tap the public equity markets during the first half of this year for up to $250 million in an add-on stock offering. Omnipoint Corp., the parent company, registered last July with the Securities and Exchange Commission for an add-on stock offering of up to 2.5 million shares.
If the carrier raises $250 million through a stock sale, it would be able to request an increase in its credit facility by the same amount, under terms of the agreement.
“We estimate that Omnipoint could generate positive cash from its consolidated operations in just over three years, but it will require approximately $1.1 billion in net additional capital to get there, excluding expected vendor financing,” said Pamela M. Stump, senior credit officer, and Douglas Bontemps, senior analyst, for Moody’s corporate finance group.
“We view Omnipoint’s current business plan as achievable given management’s abilities and the very capable support the company is receiving from its primary equipment vendors, Northern Telecom (Inc.) and Ericsson Inc. The results of the business plan also appear reasonable and, perhaps, somewhat conservative.”
Despite competition from Sprint Spectrum L.P., Bell Atlantic Mobile and AT&T Wireless Services Inc., Fitch said it expects Omnipoint Communications to report 1997 revenues of $40 million and to turn cash flow positive before 2000.
Omnipoint’s use of Global System for Mobile communications technology gives it “a notable competitive advantage over other wireless providers,” said Fitch telecom analysts Jon D. Storck and Joseph D’Virgilio.
