SAN DIEGO—Leap Wireless International Inc. amended the vendor-financing agreements between its wholly owned subsidiary Cricket Communications Inc. and Ericsson, Lucent Technologies Inc. and Nortel Networks designed to provide greater flexibility to Leap throughout the remainder of this year and next.
The amendments delay the effect of the consolidated earnings before interest, taxes, depreciation and amortization to cash interest expense covenant so that it’s now first measured at March 31, 2003. Due to the delay, Cricket agreed to a new minimum consolidated EBITDA covenant requiring EBITDA of not less than a loss of $27 million at the end of the second quarter this year, EBITDA breakeven by the end of the third quarter, $9 million in EBITDA by the end of this year and $45 million in EBITDA by the end of the first quarter next year. Leap posted a $119 million EBITDA loss for the fourth quarter of last year.
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 to 1.
“Under our current business plan, we expect to meet these and all other vendor loan covenants through the end of 2003,” said Sue Swenson, president and chief operating officer at Leap. “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.”
Leap also noted 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, and the company agreed to pledge as collateral all of its wireless operating licenses that have not been pledged as security for the vendor financing. Leap plans to invest approximately $171 million in its Cricket business plan over the next 18 months.
