Business Context and Reporting Period
This Form 8-K is filed by MetroPCS Communications, Inc. (the "Company") on March 19, 2013. The report details a material definitive agreement and the creation of a direct financial obligation by MetroPCS Wireless, Inc., an indirect, wholly-owned subsidiary of the Company. The filing is directly related to the Company's proposed merger with T-Mobile USA, Inc. (T-Mobile) under a Business Combination Agreement dated October 3, 2012.
Key Financial Metrics and Debt Issuance
On March 19, 2013, MetroPCS Wireless, Inc. completed the sale of two series of senior notes, resulting in net proceeds of approximately $3.47 billion. The specific terms of the issuance are as follows:
- 2021 Notes: $1.75 billion principal amount of 6.250% Senior Notes due April 1, 2021.
- 2023 Notes: $1.75 billion principal amount of 6.625% Senior Notes due April 1, 2023.
- Interest Payments: Semiannual payments in arrears on April 1 and October 1, commencing October 1, 2013.
- Guarantees: The notes are guaranteed on a senior unsecured basis by the Company, MetroPCS, Inc., and all direct and indirect subsidiaries of Wireless.
- Use of Proceeds: Intended to repay the outstanding senior secured credit facility, pay liabilities under interest rate protection agreements, cover fees and expenses, and fund general corporate purposes, contingent on the consummation of the T-Mobile merger.
The filing does not provide specific revenue, profit, cash flow, or margin data for the reporting period, as this is a current report focused on a specific transaction rather than a periodic financial statement.
Material Changes and Transaction Structure
The primary material change is the addition of $3.5 billion in new senior unsecured debt. The transaction structure includes significant contingencies tied to the proposed merger with T-Mobile:
- Merger Contingency: If the merger with T-Mobile is not consummated by January 17, 2014, or is terminated prior to that date, the notes are subject to a special mandatory redemption.
- Redemption Terms: The redemption price is 100% of principal if redeemed on or before September 30, 2013, and 101% of principal if redeemed after that date, plus accrued interest.
- Proceeds Segregation: Net proceeds are required to be kept in a segregated account in cash or cash equivalents pending the merger.
- Assumption of Debt: Upon consummation of the merger, the notes will be assumed by T-Mobile as the surviving corporation.
Outlook, Risks, and Covenants
The Indenture contains restrictive covenants limiting the ability of Wireless and its subsidiaries to incur additional debt, pay dividends, make distributions, repurchase stock, create liens, or merge/sell assets. These restrictions are subject to qualifications and exceptions.
Events of Default include:
- Default on interest payments for 30 days.
- Default on principal or premium payments.
- Failure to comply with other indenture obligations.
- Payment defaults on other indebtedness exceeding $50 million (or $100 million post-merger) or 0.5% of total assets.
- Bankruptcy, insolvency, or reorganization events.
- Failure to pay final judgments exceeding $50 million (or $100 million post-merger) within 60 days.
Change of Control: If a change of control occurs (other than the T-Mobile merger) accompanied by a rating downgrade, holders may require repurchase at 101% of principal plus accrued interest.
Registration Rights: The Company agreed to file a registration statement for an exchange offer or a shelf registration statement to facilitate resale. Failure to consummate the exchange offer within 360 days of the merger or maintain shelf effectiveness may trigger additional interest payments.
Investor Verification Checklist
- Verify the status of the proposed merger with T-Mobile USA, Inc. and the likelihood of consummation by the January 17, 2014 deadline.
- Confirm the current status of the segregated account holding the $3.47 billion in net proceeds.
- Review the specific terms of the existing senior secured credit facility to be repaid with the new proceeds.
- Monitor credit rating agency actions regarding the new notes and the potential for rating downgrades triggering change of control provisions.
- Assess the timeline for the filing and effectiveness of the registration statement required under the Registration Rights Agreement.