Business Context and Reporting Period
This Form 8-K is filed by MetroPCS Communications, Inc. (MetroPCS) on December 5, 2012. The filing reports the commencement of a consent solicitation by MetroPCS Wireless, Inc., an indirect wholly-owned subsidiary, to amend the indentures governing its 7 7/8% Senior Notes due 2018 and 6 5/8% Senior Notes due 2020. These actions are taken in connection with a proposed business combination between MetroPCS, Deutsche Telekom AG, and T-Mobile USA, Inc., pursuant to a Business Combination Agreement dated October 3, 2012.
Key Financial Metrics and Debt
The filing does not provide current revenue, profit, cash flow, or margin data. The primary financial details relate to the company's debt instruments and the costs associated with the proposed amendments:
- Debt Instruments: 7 7/8% Senior Notes due 2018 and 6 5/8% Senior Notes due 2020.
- Consent Fees: MetroPCS Wireless intends to pay an aggregate cash payment of $5,000,000 to consenting holders of the 2018 Notes and $5,000,000 to consenting holders of the 2020 Notes upon execution of the revised indentures.
- Financial Covenant Adjustments: Proposed amendments include a revision to the calculation of "Consolidated Cash Flow" to exclude net losses from new market construction and operations up to $300 million in any twelve-month period.
Material Changes and Proposed Amendments
The consent solicitation seeks to modify the indentures to facilitate the proposed merger. Key proposed changes include:
- Change of Control Definition: Revising the definition to exclude the consummation of the proposed business combination from triggering a Change of Control event.
- Covenants and Defaults: Conforming covenants, events of default, and non-economic terms to those anticipated for new notes issued by T-Mobile. This includes revising permissive exceptions and increasing certain dollar amount thresholds for events of default.
- Temporary vs. Permanent: Certain changes apply only until the Notes are assumed by T-Mobile; however, if the business combination is not consummated, these changes would become permanent.
Outlook, Risks, and Contingencies
Timeline: The consent solicitation is scheduled to expire at 5:00 p.m. New York City time on Friday, December 14, 2012, unless extended or terminated earlier. Execution of the amendments is conditioned on receiving consents from holders of a majority in principal amount outstanding of both series of Notes.
Risks and Contingencies: The filing includes extensive forward-looking statements regarding the proposed transaction. Significant risks include:
- Failure to receive required stockholder or regulatory approvals (including DOJ approval).
- Governmental action or legislation blocking the transaction.
- Failure to realize expected synergies or integration difficulties.
- Global economic conditions and competitive actions.
Deutsche Telekom has consented to the proposed amendments as required under the Business Combination Agreement.
Investor Verification Checklist
- Verify the final terms of the definitive proxy statement regarding the proposed business combination with Deutsche Telekom and T-Mobile.
- Confirm whether the consent solicitation for the 2018 and 2020 Notes achieved the required majority of holders by the December 14, 2012 deadline.
- Review the specific revised definitions of "Change of Control" and "Consolidated Cash Flow" in the supplemental indentures once executed.
- Monitor regulatory filings for updates on DOJ approval status and any Second Request compliance timelines.
- Assess the impact of the $300 million exclusion for new market losses on future debt covenant compliance.