Cricket Wireless 2012 Annual Report Download - page 125

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LEAP WIRELESS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Under the Credit Agreement, Leap and its restricted subsidiaries are subject to certain limitations, including
limitations on their ability to: incur additional debt or sell assets, make certain investments, grant liens and pay
dividends and make certain other restricted payments. In addition, Cricket will be required to pay down the
facility under certain circumstances if Leap and its restricted subsidiaries issue debt, sell assets or property,
receive certain extraordinary receipts or generate excess cash flow (as defined in the Credit Agreement).
The Credit Agreement also provides for an event of default upon the occurrence of a change of control,
which includes the acquisition of beneficial ownership of 35% or more of Leap’s equity securities (other than a
transaction where immediately after such transaction Leap will be a wholly owned subsidiary of a person of
which no person or group is the beneficial owner of 35% or more of such person’s voting stock), a sale of all or
substantially all of the assets of Leap and its restricted subsidiaries and a change in a majority of the members of
Leap’s board of directors that is not approved by the board. If the indebtedness under the Credit Agreement was
accelerated prior to maturity as a result of such change of control, this would give rise to an event of default
under the indentures governing the Company’s secured and unsecured senior notes and convertible notes.
Senior Notes
Discharge of Indenture and Loss on Extinguishment of Debt
On October 10, 2012, in connection with the Company’s entry into the Credit Agreement, the Company
issued a notice of redemption to redeem all of its 10.0% unsecured senior notes due 2015 in accordance with the
optional redemption provisions governing the notes at a redemption price of 105% of the principal amount of
outstanding notes, plus accrued and unpaid interest to the redemption date. On November 9, 2012, the Company
completed the redemption for a total cash payment of $324.5 million and the indenture governing the notes was
satisfied and discharged in accordance with its terms.
As a result of this redemption, the Company recognized a $18.6 million loss on extinguishment of debt
during the year ended December 31, 2012, which was comprised of $15.0 million in redemption premium, $3.5
million in unamortized debt issuance costs and $0.1 million in related professional fees.
Discharge of Non-Negotiable Promissory Note Due 2015
Cricket service was previously offered in greater Chicago and Southern Wisconsin by Denali Spectrum, LLC
(“Denali”), an entity in which the Company previously owned an 82.5% non-controlling membership interest. In
December 2010, Cricket purchased the remaining 17.5% controlling membership interest in Denali that it did not
previously own. As part of the purchase price, Cricket issued a five-year $45.5 million non-negotiable promissory
note in favor of the former holder of such controlling membership interest, which was scheduled to mature on
December 27, 2015. Interest on the outstanding principal balance of the note varied from year to year at rates ranging
from approximately 5.0% to 8.3% and compounded annually. Cricket’s obligations under the note were secured on a
first-lien basis by certain assets of Savary Island. As of December 31, 2011, $21.9 million in principal amount of
indebtedness was outstanding under the note. On August 28, 2012, in connection with the sale of certain spectrum by
Savary Island to Verizon Wireless that was secured by the noteholder’s lien, Cricket repaid the balance of the non-
negotiable promissory note in full and the non-negotiable promissory note was terminated and discharged.
Convertible Senior Notes Due 2014
In June 2008, Leap issued $250 million of unsecured convertible senior notes due 2014 in a private
placement to institutional buyers. The notes bear interest at the rate of 4.50% per year, payable semi-annually in
cash in arrears, which interest payments commenced in January 2009. The notes are Leap’s general unsecured
obligations and rank equally in right of payment with all of Leap’s existing and future senior unsecured
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