Leap Wireless faces Nasdaq delisting

Leap Wireless International stock was trading at 42 cents per share after the company warned that it could default on vendor financing loans and face a delisting by Nasdaq.

Analysts have become concerned in recent months that the company could default on vendor loans if it didn’t meet certain EBITDA (earnings before interest, taxes, depreciation and amortization) targets.

Leap said it has retained UBS Warburg to explore new sources of financing and restructuring for the outstanding debt. Leap has said for many months that it needs to raise about $225 million in additional cash by the end of 2003. About $200 million of that is needed to meet vendor debt obligations.

Ericsson, one of Leap’s vendors, said its exposure stands at $118 million. In addition, Ericsson has provided un-drawn commitments to Leap that amount to $365 million.

“While Leap has stated its intention to continue its operations in an uninterrupted fashion, the outcome of the process publicly announced and communicated to Ericsson today is uncertain,” Ericsson said in a press release.

To make matters worse, Leap said it also intends to pay a purchase price adjustment to MCG PCS by issuing 21 million shares of Leap stock. An arbitrator earlier this month ruled in favor of MCG in a dispute over the purchase price for MCG’s PCS licenses in Buffalo and Syracuse, N.Y. The arbitrator required Leap to pay an additional $41 million for the licenses in either cash or stock.

Leap said the stock offering to MCG could cause it to default on credit agreements. Consequently, since Leap won’t have time to obtain shareholder consent before the issuance, it faces delisting from Nasdaq.