NEW YORK-Citing the default on interest payments by Cricket Communications Inc., the operating subsidiary of Leap Wireless International Inc., which has about $2.1 billion in outstanding debt, Standard & Poor’s Corp. has lowered the carrier’s speculative-grade rating to CC from CCC-minus.
“The default by the subsidiary increases the likelihood that Leap will either restructure its debt through a distressed default, default on its debt or be subject to a potential bankruptcy filing if the subsidiary files for Chapter 11 protection,” said Catherine Cosentino, a telecommunications analyst for S&P.
The rating agency issued its downgrade announcement after the close of trading September 9, following Leap’s 8-K filing September 6 with the Securities and Exchange Commission. The 8-K report said Leap had defaulted on interest payments under its vendor credit facilities at Cricket Communications.
Standard & Poor’s has assigned a “CreditWatch” with negative implications to Leap’s outstanding debt, whose rating it will lower to D and then withdraw when and if the carrier restructures its debt in a manner that jeopardizes debt repayment.
