SAN DIEGO—In an attempt to alleviate investor concerns, Cricket Communications Inc., a subsidiary of Leap Wireless International Inc., amended its vendor-financing agreements with Ericsson, Lucent Technologies Inc. and Nortel Networks Corp. Leap said the amendments change the gross revenue covenant primarily to reflect changes in accounting principles and revise the capital expenditure covenant to provide greater flexibility for the company.
With the revised amendments, Leap must report gross revenues of at least $60 million for the third quarter this year, and $100 million during the fourth quarter. In addition to accounting changes, the amendments allow around $150 million in capital expenditures not made last year to be available this year and next year.
The amended agreement with Nortel includes a sub-limit on its obligations to make loans under its facility, noting Nortel’s total exposure at any one time is not required to exceed a maximum of $300 million of their $525 million commitment.
Leap said the Nortel amendment will not change the aggregate availability of $1.8 billion for total borrowing under the vendor financing agreements, and believes the amended agreements will support the capital expenditures required for the buildout of the market areas reaching approximately 23 million potential customers by the end of the year, for future growth in those markets and “for some additional expansion when appropriate.”
“We hope the adjustments we announced today reduce concerns about how the covenants work and whether we will meet them,” said Harvey White, chairman and chief executive officer of Leap. “We are pleased that our vendors have agreed to these amendments so we can concentrate our efforts on executing our successful Cricket business plan without the distraction that this issue has raised in the financial community.”
The news appeared to have placated investor fears, with Leap’s stock price jumping more than 10 percent in early Thursday trading to $14.50 per share.
