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Leap Wireless International, In Message Board

  • plentyostocks plentyostocks May 17, 2011 12:23 PM Flag

    Leap Goes Further Into Debt $400M

    Another "private placement" of debt for "working capital and other general corporate purposes".

    Leap still has negative cash flow and this will make it worse.

    They done a few of these in the last year. A little refinancing at lower rates, but mostly more debt to operate.

    Be careful that the buyers of this debt are not the same institutions that hold a lot of the common. They could bankrupt Leap in a few years and then take control of it, in affect a buyout for pennies on the dollar. They will still control it, but wipe out the retail shareholders.

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    • Leap's management, like drunken sailors or a punch-drunk boxer, always seems to get overly confident after a couple of quarters of success, and goes out and piles on debt and spends it to "grow". They then dont see the left hook that's coming from their blind side. I wish that they would have raised some equity or sold some of the spectrum that they have in unbuilt markets but which they dont have the money to deploy (or otherwise can afford to suffer the financial dilution to build) instead of piling more debt on our equity.

      Now that Sprint is paying port-in bounties (in theory targeted at T-Mobile, but the bazooka is indiscriminant in its damage) it's only time that others match, and that really puts pressure on the prepaid guys.

      Anyway, I agree. Leap can't be borrowing forever. At some point it needs to generate some free cash flow! Frankly in the 15 years since its existence, it's only delevered once -- when it flushed its debt via bankruptcy in 2002.


    • overspeculation on a buyout really made this stock rise

      With the recent debt addition, they are most likely NOT about to be bought out by anyone (why would they need to raise any cash if they are about to be taken over?

      the plummeting will begin shortly

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