Metro PCS 2009 Annual Report Download - page 133

MetroPCS Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
F-19
The facilities under the Senior Secured Credit Facility are guaranteed by MetroPCS, MetroPCS, Inc. and each of
Wireless’ direct and indirect present and future wholly-owned domestic subsidiaries. The facilities are not
guaranteed by Royal Street, but Wireless pledged the promissory note that Royal Street has given it in connection
with amounts borrowed by Royal Street from Wireless and the limited liability company member interest held in
Royal Street Communications. The Senior Secured Credit Facility contains customary events of default, including
cross-defaults. The obligations are also secured by the capital stock of Wireless as well as substantially all of
Wireless’ present and future assets and the capital stock and substantially all of the assets of each of its direct and
indirect present and future wholly-owned subsidiaries (except as prohibited by law and certain permitted
exceptions), but excludes Royal Street.
Under the Senior Secured Credit Facility, Wireless is subject to certain limitations, including limitations on its
ability to incur additional debt, make certain restricted payments, sell assets, make certain investments or
acquisitions, grant liens and pay dividends. Wireless is also subject to certain financial covenants, including
maintaining a maximum senior secured consolidated leverage ratio and, under certain circumstances, maximum
consolidated leverage and minimum fixed charge coverage ratios.
The interest rate on the outstanding debt under the Senior Secured Credit Facility is variable. The rate as of
December 31, 2009 was 6.474%, which includes the impact of our interest rate protection agreements (See Note 5).
During the year ended December 31, 2009, the Company replaced $14.5 million of previously existing letters of
credit drawn under the Senior Secured Credit Facility with letters of credit that are cash collateralized. The cash
collateral is reported in restricted cash and investments in the accompanying consolidated balance sheets.
Capital Lease Obligations
The Company has entered into various non-cancelable capital lease agreements, with varying expiration terms
through 2025. Assets and future obligations related to capital leases are included in the accompanying consolidated
balance sheets in property and equipment and long-term debt, respectively. Depreciation of assets held under capital
leases is included in depreciation and amortization expense. As of December 31, 2009, the Company had
approximately $181.2 million of capital lease obligations, with $3.3 million and $177.9 million recorded in current
maturities of long-term debt and long-term debt, respectively (See Note 11).
9. Fair Value Measurements:
The Company has adopted the provisions of ASC 820 (Topic 820, “Fair Value Measurements and
Disclosures”), for financial assets and liabilities. ASC 820 became effective for financial assets and liabilities on
January 1, 2008. The Company adopted the provisions of ASC 820 for non-financial assets and liabilities upon its
effectiveness on January 1, 2009. ASC 820 defines fair value, thereby eliminating inconsistencies in guidance found
in various prior accounting pronouncements, and increases disclosures surrounding fair value calculations.
ASC 820 establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair
value calculations. The three levels of inputs are defined as follows:
x Level 1 - Unadjusted quoted market prices for identical assets or liabilities in active markets that the
Company has the ability to access.
x Level 2 - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or
similar assets or liabilities in inactive markets; or valuations based on models where the significant
inputs are observable (e.g., interest rates, yield curves, prepayment speeds, default rates, loss severities,
etc.) or can be corroborated by observable market data.
x Level 3 - Valuations based on models where significant inputs are not observable. The unobservable
inputs reflect the Company’s own assumptions about the assumptions that market participants would
use.