SAN DIEGO-Leap Wireless International Inc., which emerged from Chapter 11 bankruptcy protection last year, reported the successful syndication and closing of a previously announced senior secured credit facilities for its Cricket Communications Inc. wholly owned subsidiary.
The new facilities consist of a six-year $500 million term loan, which was fully drawn at closing, and an undrawn five-year, $110 million revolving credit facility. Leap noted the term loan bears interest at the London Interbank Offered Rate plus 2.5 percent or bank base rate plus 1.5 percent, as selected by the company. Outstanding borrowings under the term loan must be repaid in 20 quarterly payments of $1.25 million beginning March 31, followed by four quarterly payments of $118.75 million each beginning March 31, 2010.
The term loan, which is guaranteed by Leap and secured by all present and future personal property and owned real property of Leap and Cricket, included step-down commitment for the lenders based on certain leverage ratios. The credit facilities also include limitations on Leap’s ability to incur debt or sell assets, use proceeds, make certain investments and acquisitions, grant liens and pay dividends.
Leap also announced that holders of Cricket’s 13-percent senior secured pay-in-kind notes are being notified that Cricket will redeem the $350 million in outstanding principal amount and will pay approximately $43 million of call premium and accrued interest Jan. 25.
Proceeds from the borrowings will be used to repay approximately $41 million in principal amount of debt and accrued interest owed to the Federal Communications Commission and to pay transaction fees and expenses. Leap also said the term loan will provide the company with approximately $60 million in proceeds to be used for general corporate purposes, including working capital and potential acquisitions.
“These new facilities are expected to strengthen our bottom line and free cash flow position through a reduction of our interest expense,” explained Doug Hutcheson, Leap’s executive vice president and chief financial officer. “This new financing package is also expected to provide the company with increased liquidity and financial flexibility as we execute on our strategies to improve our financial performance while supporting the measured and strategic expansion of our business.”
Leap reported last week that it added approximately 29,000 customers during the fourth quarter of 2004 and 97,000 subscribers for the entire year, which was within previous guidance of between 70,000 and 100,000 net customer additions for the year. The carrier also posted 4.1-percent customer churn during the quarter and 3.9-percent churn for the entire year, which was also within previous guidance of between 3.8- and 4-percent customer churn for the year.
