US mobile operator MetroPCS has hit back at shareholders lobbying against its reverse merger with rival T-Mobile USA, a subsidiary of Deutsche Telekom. In a letter to investors CEO Roger Linquist said statements by certain stockholders were inaccurate…
US mobile operator MetroPCS has hit back at shareholders lobbying against its reverse merger with rival T-Mobile USA, a subsidiary of Deutsche Telekom.
In a letter to investors CEO Roger Linquist said statements by certain stockholders were inaccurate and misleading.
Paulson & Co and P. Schoenfeld Asset Management (PSAM) – which hold 10% and 2% stakes respectively – had expressed doubts about the new company’s leverage and high interest rates on its debt following a successful merger. PSAM added that the 74%/26% ownership split was unfair.
MetroPCS CEO Linquist addressed each of the shareholder’s key concerns and defended the terms of the transaction agreed in October last year.
He said that the idea that the combined company’s debt would be too high was a “misperception”, arguing that the merged operator would be leveraged to the same level as its peers. It would also have a higher S&P credit rating – BB – than its rivals and already has plans to de-lever through 2013 by cutting costs.
Linquist also defended the terms of the DT debt that the new company would hold.
Deutsche Telekom plans to roll T-Mobile USA’s existing intercompany debt into new US$15bn senior unsecured notes of the combined company. It would also provide the combined company with a US$0.5bn unsecured revolving credit facility and a US$5.5bn backstop commitment for certain MetroPCS third-party financing transactions.
Linquist described the terms of the debt as “favourable”. They were based upon market conditions, although he pointed out that a market does not exist for a US$21bn debt commitment. The financing would give the merged operator a long-lasting capital structure without any near-term maturities.
The CEO also dismissed concerns about the proposed 74%/26% split, saying that the merger created significantly more value for MetroPCS versus the possibility of the operator staying independent.
Linquist urged stockholders to vote in favour of the merger to “maximise the value of your investment”.
The vote on the merger is set for 12 April. Analysts have said recently that they think it is likely that Deutsche Telekom will improve terms for MetroPCS shareholders.
Last week the deal received antitrust clearance, but it is still awaiting FCC and CFIUS approvals.
Meanwhile MetroPCS offered US$3.5bn in notes yesterday. The proceeds will be used to pay off its senior secured credit facility and other fees, provided the reverse merger closes successfully. If the deal falls apart or does not close before January next year, MetroPCS will be obliged to repurchase the notes.
