Business Context and Reporting Period
This Form 8-K is filed by MetroPCS Communications, Inc. (Registrant) on November 17, 2010. The report details a material definitive agreement entered into by MetroPCS Wireless, Inc., an indirect, wholly-owned subsidiary of the Registrant.
Key Financial Metrics and Transaction Details
- Debt Issuance: Completed a public offering of $1.0 billion aggregate principal amount of 6 5/8% senior notes due 2020.
- Net Proceeds: Approximately $989.0 million after underwriting discounts, commissions, and estimated offering expenses.
- Interest Terms: Interest is payable semi-annually in cash on May 15 and November 15, commencing May 15, 2011.
- Maturity: November 15, 2020.
- Guarantees: Guaranteed on a senior unsecured basis by MetroPCS Communications, Inc., MetroPCS, Inc., and current and future direct and indirect domestic restricted subsidiaries of Wireless. Royal Street Communications, LLC is not a guarantor.
- Ranking: Notes rank equally with existing senior unsecured indebtedness, including 9 1/4% senior notes due 2014 and 7 7/8% senior notes due 2018.
Material Changes and Use of Proceeds
The primary material change is the increase in long-term debt obligations. The net proceeds from the $1.0 billion offering are intended to be used for the following:
- Redemption of all $950.0 million outstanding principal amount of the 9 1/4% senior notes due 2014 at a price of 104.625% of the principal amount, plus accrued interest.
- General corporate purposes.
Redemption Provisions, Covenants, and Risks
Redemption Options
- Optional Redemption: Wireless may redeem notes on or after November 15, 2015, at prices ranging from 103.313% to 100% of principal.
- Equity Proceeds Redemption: Prior to November 15, 2013, up to 35% of the principal may be redeemed using net cash proceeds from equity sales at 106.625% of principal.
- Make-Whole Redemption: Prior to November 15, 2015, notes may be redeemed at 100% of principal plus an Applicable Premium.
- Change of Control: If a change of control results in a rating downgrade, holders may require repurchase at 101% of principal plus accrued interest.
Covenants and Restrictions
The Indenture restricts the ability of Wireless and its domestic restricted subsidiaries to incur additional debt, pay dividends, make distributions, make certain investments, repurchase stock, create liens, enter into affiliate transactions, or merge/sell substantially all assets. These limitations are subject to qualifications and exceptions.
Events of Default
Events of Default include failure to pay interest or principal, failure to comply with covenants, payment defaults on other indebtedness of $50.0 million or more, bankruptcy/insolvency events, and failure to pay final judgments exceeding $50.0 million within 60 days.
Investor Verification Checklist
- Verify the exact redemption price and timing for the 2014 Notes to confirm the net cash impact of the refinancing.
- Review the full text of the Second Supplemental Indenture (Exhibit 4.1) for specific covenants and exceptions regarding future debt incurrence.
- Confirm the status of Royal Street Communications, LLC and its subsidiaries regarding the exclusion from guarantees.
- Assess the impact of the new 6 5/8% interest rate compared to the redeemed 9 1/4% rate on future interest expense.
- Check for any subsequent filings regarding the actual execution of the 2014 Notes redemption.