Leap Wireless files Chapter 11; draft plan sees cash and stock for noteholders

By Carlise Newman

Chicago, April 14 - Leap Wireless International Inc. and its subsidiary Cricket Communications Inc. filed for Chapter 11 bankruptcy protection on April 13 in the U.S. Bankruptcy Court for the Southern District of California.

Leap filed a preliminary draft plan of reorganization and disclosure statement with the bankruptcy court Monday.

Under the draft plan, holders of Cricket's senior secured vendor debt would receive $300-500 million of senior secured notes issued by reorganized Cricket, and newly issued shares of making up 93-97% of the reorganized Leap's common stock.

Holders of general unsecured claims against Leap including holders of Leap's senior notes and senior discount notes would receive the remaining unsecured cash, cash equivalents and short-term investments at the Leap level totaling $82.4 million as of Feb. 28, along with interest on that cash and equivalents; newly issued shares for 3-5% of the equity of reorganized Leap; and other assets not used in the Cricket business to be transferred to a creditor trust and liquidated.

Holders of Leap's senior notes would also receive $14 million in cash previously pledged to secure payments of interest on the notes.

Current Leap shareholders could potentially receive 0-2% of the equity of reorganized Leap.

The terms of any plan of reorganization agreed to could differ materially from the draft plan, Leap cautioned.

The company listed assets of $271.72 million and debts of $932.85 million in its Chapter 11 filing.

The largest unsecured creditors - all representing holders or holding bond debt - include Depository Trust Co., owed $893 million; Northern Trust, owed $308 million; Goldman Sachs, owed $188.24 million; Morgan Stanley, owed $164.907 million; Bear Stearns Securities Corp., owed $123.697 million; J.P. Morgan Chase, owed $39 million; RBC Dominion Securities, owed $25 million; Citibank NA, owed $14.459 million; ABN Amro, owed $10.08 million; and Pershing LLC, owed $4.775 million.

Leap and Cricket expect to have an agreement with their creditors on a plan of reorganization in the next few weeks. Leap said in a news release that there will be very limited or no value available for distribution to the common stockholders of Leap.

While the company is reorganizing, daily operations at the company will continue; Cricket stores will remain open; network service will not be interrupted; employees will be paid; and suppliers will be paid in the ordinary course of business for goods and services provided after the filing date. The company does not expect any organizational changes or reduction in force as a result of this filing.

San Diego-based Leap is a wireless communications company.

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