UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended __________JUNE 30, 1997_________________________
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________________to___________________________
333-06609-01
Commission file number ________________333-06609-02 ___________________________
SPRINT SPECTRUM L.P.
SPRINT SPECTRUM FINANCE CORPORATION __________________
(Exact name of registrant as specified in its charter)
DELAWARE 48-1165245
DELAWARE 43-1746537
(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
4900 Main Street, Kansas City, Missouri, 64112
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(Address of principal executive offices)
(816) 559-1000
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
As of August 1, 1997, Sprint Spectrum Finance Corporation had Common Stock
outstanding of 100 shares.
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SPRINT SPECTRUM L.P.
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SPRINT SPECTRUM FINANCE CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997
INDEX
Page
Number
---------------
Part I - Financial Information.................................... 1 - 11
Item 1a. Financial Statements - Sprint Spectrum L.P......... 1 - 3
Consolidated Condensed Balance Sheets.................... 1
Consolidated Condensed Statements of Operations.......... 2
Consolidated Condensed Statements of Cash Flows.......... 3
Notes to Consolidated Condensed Financial Statements..... 4 - 7
Item 1b. Financial Statements - Sprint Spectrum Finance
Corporation.............................................. 8 - 11
Condensed Balance Sheets................................. 8
Condensed Statements of Operations....................... 9
Condensed Statements of Cash Flows....................... 10
Notes to Condensed Financial Statements.................. 11
Item 2a. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Sprint Spectrum L.P. 12 - 17
Item 2b. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Sprint Spectrum
Finance Corporation...................................... 18
Part II - Other Information
Item 1. Legal Proceedings................................... 19
Item 2. Changes in Securities............................... 19
Item 3. Defaults On Senior Securities....................... 19
Item 4. Submission of Matters to a Vote of Security Holders.. 19
Item 5. Other Information.................................... 19
Item 6. Exhibits and Reports on Form 8-K..................... 19 - 20
Signature.......................................................... 21 - 22
Exhibits
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PART I.
Item 1a.
SPRINT SPECTRUM L.P.
(A Development Stage Enterprise)
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands)
June 30, December 31,
1997 1996
- --------------------------------------------------------------------------------------------------------------------
(Unaudited)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents...................................... $ 92,403 $ 49,988
Accounts receivable, net....................................... 24,449 3,310
Receivable from affiliates..................................... 22,423 14,021
Inventory...................................................... 84,238 72,414
Prepaid expenses and other assets.............................. 27,327 14,260
--------------- ----------------
Total current assets......................................... 250,840 153,993
INVESTMENT IN PCS LICENSES, net................................... 2,112,471 2,122,908
PROPERTY, PLANT AND EQUIPMENT, net................................ 2,524,899 1,408,680
MICROWAVE RELOCATION COSTS, net................................... 213,548 135,802
OTHER ASSETS...................................................... 88,189 77,383
================ ================
TOTAL ASSETS...................................................... $ 5,189,947 $ 3,898,766
================ ================
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable............................................... $ 83,678 $ 196,146
Payable to affiliates.......................................... 849 5,626
Accrued expenses............................................... 167,893 59,200
Current maturities of long-term debt .......................... 5,038 5,049
--------------- ----------------
Total current liabilities................................... 257,458 266,021
LONG-TERM COMPENSATION OBLIGATION................................. 20,273 11,356
CONSTRUCTION OBLIGATIONS.......................................... 1,167,140 714,934
LONG TERM DEBT.................................................... 1,820,132 686,192
COMMITMENTS AND CONTINGENCIES
LIMITED PARTNER INTEREST IN CONSOLIDATED SUBSIDIARY............... 5,000 5,000
PARTNERS' CAPITAL AND ACCUMULATED DEFICIT:
Partners' capital.............................................. 2,948,793 2,767,564
Deficit accumulated during the development stage............... (1,028,849) (552,301)
--------------- ----------------
Total partners' capital...................................... 1,919,944 2,215,263
=============== ================
TOTAL LIABILITIES AND PARTNERS' CAPITAL........................... $ 5,189,947 $ 3,898,766
=============== ================
See notes to consolidated condensed financial statements.
</TABLE>
2
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<TABLE>
<CAPTION>
PART I.
Item 1a.
SPRINT SPECTRUM L.P.
(A Development Stage Enterprise)
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(In Thousands)
Cumulative
Period from
October 24, 1994
(date of
Three Months Ended Six Months Ended inception) to
June 30, June 30, June 30,
--------------------------------- --------------------------------
1997 1996 1997 1996 1997
- ------------------------------------- ---------------- ---------------- --------------- ---------------- ----------------
OPERATING REVENUES:
<S> <C> <C> <C> <C> <C>
Service....................... $ 8,583 $ - $ 9,366 $ - $ 9,399
Equipment..................... 16,803 - 25,487 - 29,629
---------------- ---------------- --------------- ---------------- ----------------
Total operating revenues.... 25,386 - 34,853 - 39,028
OPERATING EXPENSES:
Cost of service............... 34,883 3,094 57,288 3,099 79,216
Cost of equipment............. 52,424 - 78,833 - 92,981
Selling....................... 29,847 896 42,486 959 80,976
General and administrative.... 119,644 42,523 224,090 73,179 565,900
Depreciation and amortization. 66,300 384 100,682 638 112,206
---------------- ---------------- --------------- ---------------------------------
Total operating expenses.... 303,098 46,897 503,379 77,875 931,279
LOSS FROM OPERATIONS............. (277,712) (46,897) (468,526) (77,875) (892,251)
OTHER INCOME (EXPENSE):
Interest income............... 372 955 1,274 940 9,895
Interest expense.............. (12,077) - (12,171) (342) (12,720)
Other income.................. 1,753 71 2,875 214 4,717
Equity in loss of unconsolidated
partnership................. - (44,899) - (81,132) (138,490)
---------------- ---------------- --------------- ---------------- ----------------
Total other income (expense) (9,952) (43,873) (8,022) (80,320) (136,598)
================ ================ =============== ================ ================
NET LOSS......................... $ (287,664) $ (90,770) $ (476,548) $ (158,195) $ (1,028,849)
================ ================ =============== ================ ================
See notes to consolidated condensed financial statements.
</TABLE>
3
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<TABLE>
<CAPTION>
PART I.
Item 1a.
SPRINT SPECTRUM L.P.
(A Development Stage Enterprise)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Thousands)
Cumulative
Period from
October 24,
Six Months Ended 1994 (date of
inception) to
June 30, June 30,
--------------------------------------
1997 1996 1997
- --------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss........................................ $ (476,548) $ (158,195) $ (1,028,849)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Equity in loss of unconsolidated partnership.. - 81,132 138,490
Depreciation and amortization of property and 100,682 638 112,206
intangibles.................................
Amortization of debt discount and issuance 22,615 - 36,623
costs.......................................
Loss on disposal of non-network equipment..... - - 31
Changes in assets and liabilities:
Receivables................................. (29,541) (3,901) (46,872)
Inventory................................... (11,824 - (84,238)
Prepaid expenses and other assets........... (8,664) (358) (30,460)
Accounts payable and accrued expenses....... (3,552) 22,449 257,420
Long term compensation obligation........... 8,917 4,750 20,273
--------------- -------------- ---------------
Net cash used in operating activities....... (397,915) (53,485) (625,376)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures......................... (750,740) (197,613) (1,466,803)
Microwave relocation costs................... (80,035) (27,146) (203,389)
Purchase of PCS licenses..................... - - (2,124,594)
Investment in unconsolidated partnership..... - - (131,752)
Loan to unconsolidated partnership........... - (138,000) (172,655)
--------------- -------------- ---------------
Net cash used in investing activities........ (830,775) (362,759) (4,099,193)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt and vendor
financing.................................. 1,156,128 472 1,830,329
Payments on long-term debt................... (40,023) - (40,047)
Debt issuance costs.......................... (20,000) (1,305) (91,791)
Limited partner interest in consolidated
subsidiary................................ - - 5,000
Borrowings from affiliates................... - - 5,000
Partner capital contributions................ 175,000 447,509 3,141,315
Dividends paid............................... - - (32,834)
--------------- -------------- ---------------
Net cash provided by financing activities.... 1,271,105 446,676 4,816,972
--------------- -------------- ---------------
INCREASE IN CASH AND CASH EQUIVALENTS.......... 42,415 30,432 92,403
CASH AND CASH EQUIVALENTS, Beginning of period.. 49,988 1,123 -
--------------- -------------- ---------------
CASH AND CASH EQUIVALENTS, End of period.. $ 92,403 $ 31,555 $ 92,403
=============== ============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid, net of amount capitalized....... $ 27 $ - $ 350
NON-CASH INVESTING ACTIVITIES:
A PCS license covering the Omaha MTA and valued
at $6,229 was contributed to the Company by Cox
Communications during the six months ended June
30, 1997.
Capital expenditures of $750,740 and $1,466,803
for the six months and cumulative period ended
June 30, 1997, respectively are net of
construction obligations of $452,206 and
$1,167,140, respectively.
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
PART I.
Item 1a.
SPRINT SPECTRUM L.P.
(A Development Stage Enterprise)
Notes to Consolidated Condensed Financial Statements (Unaudited)
June 30, 1997 and 1996
The information contained in this Form 10-Q for the three- and six-month
interim periods ended June 30, 1997 and 1996 and the cumulative period from
October 24, 1994 (date of inception) to June 30, 1997 has been prepared in
accordance with instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In
the opinion of management, all adjustments considered necessary, consisting only
of normal recurring accruals, to present fairly the consolidated financial
position, results of operations, and cash flows for such interim periods have
been made (See Note 1).
Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The results of operations
for the six months ended June 30, 1997 are not necessarily indicative of the
operating results that may be expected for the year ended December 31, 1997.
1. Organization
Sprint Spectrum L.P. (the "Company") is a limited partnership formed in
Delaware on March 28, 1995, by Sprint Spectrum Holding Company, L.P.
("Holdings") and MinorCo, L.P. ("MinorCo") both of which were formed by Sprint
Enterprises, L.P., TCI Spectrum Holdings, Inc. (formerly known as TCI Telephony
Services, Inc., as successor to TCI Network Services), Cox Telephony Partnership
and Comcast Telephony Services (together the "Partners"). The Company was formed
pursuant to a reorganization of the operations of an existing partnership,
WirelessCo, L.P. ("WirelessCo") which transferred certain operating functions to
Holdings. The Partners are subsidiaries of Sprint Corporation ("Sprint"),
Tele-Communications, Inc. ("TCI"), Cox Communications, Inc. ("Cox"), and Comcast
Corporation ("Comcast" and together with Sprint, TCI and Cox, the "Parents"),
respectively. The Partnership and certain other affiliated partnerships offer
services as Sprint PCS.
The partners of the Company have the following ownership interests as of
June 30, 1997 and 1996:
Sprint Spectrum Holding Company, L.P. (general partner)....greater than 99%
MinorCo, L.P. (limited partner)................................less than 1%
The Company is consolidated with its subsidiaries, WirelessCo, Sprint
Spectrum Equipment Company, L.P. ("EquipmentCo"), Sprint Spectrum Realty
Company, L.P. ("RealtyCo") and Sprint Spectrum Finance Corporation ("FinCo").
WirelessCo was formed on October 24, 1994 to invest in and hold the PCS
licenses. On May 15, 1996, EquipmentCo and RealtyCo were organized for the
purpose of holding PCS network-related real estate interests and assets. On May
20, 1996, FinCo was formed to be a co-obligor of the senior notes and senior
discount notes.
Development Stage Company - The Company and its subsidiaries are
development stage enterprises. The success of the Company's development is
dependent on a number of business factors, including maintaining financing to
complete network construction, generating operating revenues, successfully
<PAGE>
deploying the PCS network and attaining profitable levels of market demand
for Company products and services.
2. Summary of Significant Accounting Policies
Basis of Presentation - Prior to July 1, 1996, substantially all wireless
operations of Sprint Spectrum L.P. and subsidiaries and Holdings were conducted
at Holdings and substantially all operating assets and liabilities, with the
exception of the interest in an unconsolidated subsidiary and the ownership
interest in PCS licenses, were held at Holdings. As of July 1, 1996, Holdings
transferred these net assets, and assigned agreements related to the wireless
operations to which it was a party to Sprint Spectrum L.P. (the
"Reorganization").
For purposes of these consolidated condensed financial statements, these
transactions have been treated as transactions between entities under common
control and accounted for in a manner similar to a pooling of interest ("As
Reorganized"). The Company, as used in these financial statements, includes the
pooled operations of Holdings through June 30, 1996. Accordingly, for periods
prior to July 1, 1996, Sprint Spectrum L.P.'s historical financial statements
have been restated to reflect those operations of Holdings that were transferred
on July 1, 1996 on a pooled basis. Information as of June 30, 1996 with respect
to the financial position and results of operations pooled herein is as follows
(in thousands):
<TABLE>
<CAPTION>
Sprint
Spectrum L.P. Holdings Combined
<S> <C> <C> <C>
Total Assets.................................. $2,268,805 $ 2,561,328 $2,561,328
Partners' Capital & Accumulated Deficit....... 2,258,426 2,469,529 2,472,384
Net Loss...................................... (81,278) (158,195) (158,195)
</TABLE>
Revenue Recognition - Operating revenues for PCS services are recognized as
service is rendered. Operating revenues for equipment sales are recognized at
the time the equipment is delivered to a customer or an unaffiliated agent.
Accounts Receivable - Accounts receivable are net of an allowance for doubtful
accounts of approximately $1.7 million and $202,000 at June 30, 1997 and
December 31, 1996, respectively.
Investment in PCS Licenses and Other Intangibles - During 1994 and 1995, the
Federal Communications Commission ("FCC") auctioned PCS licenses in specific
geographic service areas. The FCC grants licenses for terms of up to ten years,
and generally grants renewals if the licensee has complied with its license
obligations. The Company believes it has and will continue to meet all
requirements necessary to secure renewal of its PCS licenses. The Company has
also incurred costs associated with microwave relocation in the construction of
the PCS network. Amortization of PCS licenses and microwave relocation costs
will commence as each service area becomes operational, over estimated useful
lives of 40 years. Accumulated amortization for PCS licenses and microwave
relocation costs totaled approximately $20.7 million and $1.7 million as of June
30, 1997 and December 31, 1996, respectively. Interest expense capitalized
pertaining to the acquisition of the PCS licenses has been included in Property,
plant and equipment.
<PAGE>
Capitalized Interest - Interest costs associated with the construction of
capital assets incurred during the period of construction are capitalized. The
total capitalized as of June 30, 1997 and December 31, 1996 was approximately
$100.8 million and $30.5 million, respectively.
Major Customer - The Company markets its products through multiple distribution
channels, including Company-owned retail stores and third-party retail outlets.
Sales to one third-party retail customer exceeded 10% of Equipment revenue in
the consolidated condensed statements of operations for the three and six months
ended June 30, 1997.
Income Taxes - The Company has not provided for federal or state income taxes
since such taxes are the responsibility of the individual Partners.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Paging Services - The Company has commenced paging services pursuant to
agreements with Paging Network Equipment Company ("PageNet") and Sprint
Communications Company, L.P. ("Sprint Communications"). For the six months ended
June 30, 1997 and 1996, Sprint Communications received agency fees of
approximately $5.4 million and $620,000, respectively.
Reclassifications - Certain reclassifications have been made to the 1996
financial statements to conform with the 1997 financial statement presentation.
3. Long-Term Debt and Borrowing Arrangements
The long-term debt of the Company as of June 30, 1997 and December 31, 1996 is
summarized as follows (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------------- ------------------
<S> <C> <C>
11% Senior Notes due in 2006 $ 250,000 $ 250,000
12 1/2% Senior Discount Notes due in 2006, net of unamortized
discount of $196,678 and $214,501 at June 30, 1997 and
December 31, 1996, respectively 303,322 285,499
Credit facility - term loans 300,000 150,000
Credit facility - revolving credit 350,000 -
Vendor financing 616,129 -
Note payable to affiliate due in 1998 5,000 5,000
Other 719 742
---------------- ------------------
Total debt 1,825,170 691,241
Less current maturities 5,038 5,049
---------------- ------------------
Long-term debt $ $ 686,192
1,820,132
================ ==================
</TABLE>
<PAGE>
Bank Credit Facility - The Company entered into an agreement with The Chase
Manhattan Bank ("Chase") as agent for a group of lenders for a $2 billion bank
credit facility dated October 2, 1996. The proceeds of this facility are to be
used to finance working capital needs, subscriber acquisition costs, capital
expenditures and other general Company purposes.
The facility consists of a revolving credit commitment of $1.7 billion and a
$300 million term loan commitment. As of June 30, 1997, the term loans bear a
weighted average interest rate of 8.12%. The amount available under the total
revolving credit commitment will be increased upon the achievement of certain
financial and operating conditions as defined in the agreement. As of June 30,
1997, $350 million had been drawn at a weighted average interest rate of 8.46%
and $100 million remained available. Commitment fees for the revolving portion
of the agreement are payable quarterly based on average unused revolving
commitments. The Company has had no additional borrowings under the revolving
credit facility subsequent to June 30, 1997.
Vendor Financing - As of October 2, 1996, the Company entered into financing
agreements with Northern Telecom, Inc. ("Nortel") and Lucent Technologies, Inc.
("Lucent" and together with Nortel, the "Vendors") for multiple drawdown term
loan facilities totaling $1.3 billion and $1.8 billion, respectively. The
proceeds of such facilities are to be used to finance the purchase of goods and
services provided by the Vendors.
On April 30, 1997, the Company amended the terms of its financing agreement with
Nortel. The amendment provides for a syndication of the financing commitment
between Nortel, several banks and other vendors (the "Nortel Lenders"). The
commitment provides financing in two phases. During the first phase, the Nortel
Lenders will finance up to $800 million. Under the second phase, the Nortel
Lenders will finance up to an additional $500 million upon the achievement of
certain operating and financial conditions. As of June 30, 1997, $145 million
had been borrowed at an interest rate of 9.16% with $655 million remaining
available under the first phase. In addition, the Company paid $20 million in
origination fees upon the initial draw down under the first phase and will be
obligated to pay additional origination fees on the date of the initial draw
down loan under the second phase. Subsequent to June 30, 1997, the Company
borrowed an additional $70.3 million under the Nortel facility.
On May 29, 1997, the Company amended the terms of its financing agreement with
Lucent. The amendment provides for a syndication of the financing commitment
between Lucent, Sprint and other banks and vendors (the "Lucent Lenders"). The
Lucent Lenders have committed to financing up to $1.5 billion through December
31, 1997, and up to an aggregate of $1.8 billion thereafter, with Sprint
financing up to $300 million. The Company pays a facility fee on the daily
amount of certain loans outstanding under the agreement, payable quarterly. The
Lucent agreement terminates June 30, 2001. As of June 30, 1997, the Company had
borrowed approximately $471 million under the Lucent facility at a weighted
average interest rate of 8.93%. Subsequent to June 30, 1997, the Company
borrowed an additional $35.8 million under the Lucent facility. There have been
no borrowings from Sprint under the Lucent facility.
The Nortel and Lucent agreements provide for conversion of accrued interest on
the outstanding debt into the long-term loan obligation through February 8, 1998
and March 30, 1998, respectively.
Certain amounts included under Construction Obligations on the consolidated
condensed balance sheets may be financed under the Vendor Financing agreements.
<PAGE>
<TABLE>
<CAPTION>
Part I.
Item 1b.
SPRINT SPECTRUM FINANCE CORPORATION
(A wholly-owned subsidiary of Sprint Spectrum L.P.)
CONDENSED BALANCE SHEETS
June 30, December 31,
1997 1996
- ----------------------------------------------------------------- ------------------ ------------------
(Unaudited)
ASSETS
<S> <C> <C>
Receivable from parent......................................... $ 100 $ 100
================== ==================
TOTAL ASSETS................................................... $ 100 $ 100
================== ==================
STOCKHOLDER'S EQUITY
Common stock, $1.00 par value; 1,000 shares authorized; 100
shares issued and outstanding................................ $ 100 $ 100
================== ==================
TOTAL STOCKHOLDER'S EQUITY..................................... $ 100 $ 100
================== ==================
</TABLE>
See notes to condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
Part I.
Item 1b.
SPRINT SPECTRUM FINANCE CORPORATION
(A wholly-owned subsidiary of Sprint Spectrum L.P.)
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
Period from
May 21, 1996
(date of inception)
Three Months Ended Six Months Ended to
June 30, 1997 June 30, 1997 June 30, 1997
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Operating Revenues.................. $ - $ - $ -
Operating Expenses.................. - - -
--------------------- --------------------- ---------------------
Net Income.......................... $ - $ - $ -
===================== ===================== =====================
See notes to condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Part I.
Item 1b.
SPRINT SPECTRUM FINANCE CORPORATION
(A wholly-owned subsidiary of Sprint Spectrum L.P.)
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six From
Months date of
Ended inception
June 30, to June 30, 1997
1997
------------------ -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Adjustments to reconcile net income to net cash used in
operating activities:
Net income............................................... $ - $ -
Changes in assets and liabilities:
Receivables............................................ - (100)
------------------ ----------------
Net cash used in operating activities.................... - (100)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock................................. - 100
------------------ ----------------
Net cash provided by financing activities................ - 100
------------------ ----------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS......................................... - -
CASH AND CASH EQUIVALENTS, Beginning of Period..............
- -
================== =================
CASH AND CASH EQUIVALENTS, End of Period.................... $ - $ -
================== =================
See notes to condensed financial statements.
</TABLE>
10
<PAGE>
Part I.
Item 1b.
SPRINT SPECTRUM FINANCE CORPORATION
(A wholly-owned subsidiary of Sprint Spectrum L.P.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
The information contained in this Form 10-Q for the three- and six-month interim
periods ended June 30, 1997 and the cumulative period from May 21, 1996 (date of
inception) to June 30, 1997 has been prepared in accordance with instructions to
Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, all
adjustments considered necessary, consisting only of normal recurring accruals,
to present fairly the consolidated financial position, results of operations,
and cash flows for such interim periods have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. The results of operations for the six months
ended June 30, 1997 are not necessarily indicative of the operating results that
may be expected for the year ended December 31, 1997.
1. ORGANIZATION
Sprint Spectrum Finance Corporation ("FinCo"), a Delaware corporation, was
formed on May 21, 1996 and is a wholly-owned subsidiary of Sprint Spectrum L.P.
(the "Partnership"). FinCo was formed to be a co-obligor of $250 million in
Senior Notes and $500 million in Senior Discount Notes.
The Partnership contributed $100 to FinCo on May 21, 1996 in exchange for 100
shares of common stock.
<PAGE>
PART I.
Item 2a.
SPRINT SPECTRUM L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with Sprint
Spectrum L.P.'s consolidated condensed financial statements and notes thereto.
The term "Company" refers to Sprint Spectrum L.P. and its direct and indirect
subsidiaries, including FinCo, WirelessCo, RealtyCo, and EquipmentCo. As of July
1, 1996, Holdings transferred substantially all operating assets and liabilities
to the Company. The Company's financial information as presented includes the
pooled operations of Holdings through June 30, 1996.
The Company includes certain estimates, projections and other forward-looking
statements in its reports as well as in presentations to analysts and others and
in other material disseminated to the public. There can be no assurances of
future performance and actual results may differ materially from those in the
forward-looking statements. Factors which could cause actual results to differ
materially from estimates or projections contained in forward-looking statements
include:
- the establishment of a market for new digital PCS services;
- the introduction of competitive service plans and pricing and other
effects of vigorous competition in the markets in which the Company
currently operates or intends to market its services;
- the impact of technological change which may diminish the value of
existing equipment which may, in turn, result in the need to incur
additional costs to upgrade previously sold communications equipment;
- the cost of entering new markets necessary to provide services;
- the impact of any unusual items resulting from ongoing evaluations of
the Company's business strategies;
- the effects of unanticipated delays or problems with the development
of technologies and systems used by the Company;
- requirements imposed on the Company and its competitors by the
Federal Communications Commission ("FCC") and state regulatory
commissions under the Telecommunications Act of 1996;
- the possibility of one or more of the markets in which the Company
will compete being impacted by variations in political, economic or
other factors over which the Company has no control;
- the effects of unanticipated delays resulting from zoning or other
disputes with municipalities; and
- unexpected results in litigation.
General
The Company is a development stage enterprise formed for the purpose of
establishing a nationwide personal communications service ("PCS") wireless
telecommunications network. The Company acquired PCS licenses in the FCC's A
Block and B Block PCS auction, which concluded in March 1995, to provide service
to 29 major trading areas ("MTAs") covering 150.3 million Pops. Additionally,
Cox contributed to the Company, effective February 6, 1997, a PCS license for
the Omaha MTA covering 1.7 million Pops. The Company has also affiliated and
expects to continue to affiliate with other PCS
<PAGE>
providers. Pursuant to affiliation agreements, each affiliated PCS service
provider will use the Sprint (a registered trademark of Sprint Communications
Company, L.P.) brand name. Holdings owns a 49% limited partnership interest in
American PCS, L.P. ("APC"), which, through subsidiaries, owns a PCS license for,
and operates a broadband GSM (global system for mobile communications) PCS
system in, the Washington D.C./Baltimore MTA. APC has affiliated with the
Company and is marketing its products and services under the Sprint brand name.
Holdings also owns a 49% limited partnership interest in Cox Communications PCS,
L.P. ("Cox PCS"), a limited partnership that owns a PCS license for the Los
Angeles-San Diego MTA covering 21.5 million Pops. Cox, which previously owned
this license, contributed the license to Cox PCS on March 31, 1997 and will
manage and control Cox PCS. The Company signed an affiliation agreement with Cox
PCS on December 31, 1996.
The Company also expects to provide various services to PhillieCo, L.P.
("PhillieCo"), a limited partnership organized by and among subsidiaries of
Sprint, TCI and Cox that owns a PCS license for the Philadelphia MTA covering
9.1 million Pops. In addition, SprintCom, Inc. ("SprintCom"), an affiliate of
Sprint, participated in the FCC's D and E Block auction which ended January 14,
1997, and was awarded licenses for 139 of 493 Basic Trading Areas ("BTAs")
covering 70 million Pops, all of which are geographic areas not covered by the
Company's owned PCS licenses or licenses owned by PhillieCo, APC or Cox PCS. The
Company is in the process of negotiating an agreement with SprintCom to build
out the network infrastructure in certain BTA markets where SprintCom was
awarded PCS licenses. In accordance with an agreement among the Partners and the
Amended and Restated Agreement of Limited Partnership of MajorCo, L.P. (renamed
Sprint Spectrum Holding Company, L.P.) dated January 31, 1996 (the "Partnership
Agreement"), SprintCom is required to offer to enter into an affiliation
agreement with Holdings with respect to such BTA licenses pursuant to which
SprintCom's systems in such areas would be included in the Company's national
PCS network, although no assurance can be given that SprintCom and Holdings will
enter into any such affiliation agreement.
To date, the Company has incurred expenditures in conjunction with PCS license
acquisitions, initial design and construction of the PCS network, engineering,
marketing, administrative and other start up related expenses. The Company
commenced initial commercial operations in certain MTAs for its PCS services
late in the fourth quarter of 1996 and, as a result, has generated minimal
operating revenues. The Company intends to initiate service in portions of most
MTAs during the summer of 1997. Pop coverage at the end 1997 is expected to
reach approximately 55% of the Pops in all of the Company's license areas with
coverage in the individual license areas ranging from 19% to 80%. The timing of
launch in individual markets will be determined by various factors, principally
zoning and local competitive market factors. The Company intends to continue to
expand its coverage in its PCS markets in its existing license areas based on
actual market experience, customer demand, and reductions in the cost of
technology. The extent to which the Company is able to generate operating
revenue and earnings is dependent on a number of business factors, including
maintaining existing financing to complete network construction, generating
operating revenues, successfully deploying the PCS network and attaining
profitable levels of market demand for the Company's products and services.
Liquidity and Capital Resources
The buildout of the Company's PCS network and the marketing and distribution of
the Company's PCS products and services will continue to require substantial
capital. The Company currently estimates that its capital requirements (capital
expenditures, the cost of its existing licenses, working capital, debt service
requirements and anticipated operating losses) for the period from inception
through the end of 1998 (based on the Company's current plans for its network
buildout in its current license areas) will total approximately $8.9 billion (of
which approximately $6.2 billion had been expended as of June 30,
<PAGE>
1997). After 1998, the Company will also require additional capital for coverage
expansion, volume-driven network capacity and other capital expenditures for
existing and new license areas (if any), working capital, debt service
requirements and anticipated further operating losses. Costs associated with the
network buildout include switches, base stations, towers, antennae, radio
frequency engineering, cell site construction and microwave relocation.
Management estimates that capital expenditures associated with the buildout will
total approximately $3.9 billion through 1997, including $3.2 billion through
June 30, 1997. Actual amounts of the funds required may vary materially from
these estimates and additional funds would be required in the event of
significant departures from the current business plan, unforeseen delays, cost
overruns, unanticipated expenses, regulatory changes, engineering design changes
and other technological risks.
The Company currently has minimal sources of revenue to meet its capital
requirements and has relied upon capital contributions, advances from Holdings,
third party debt and public debt. The Holdings partnership agreement provides
for a planned capital amount to be contributed by the Partners ("Total Mandatory
Contributions"), which represents the sum of $4.2 billion, which includes agreed
upon values attributable to the contributions of certain additional PCS licenses
by a Partner. The Total Mandatory Contributions amount is required to be
contributed in accordance with capital contribution schedule to be set forth in
approved annual budgets if requested by the Holdings partnership board (or by
the Chief Executive Officer of Holdings pursuant to authority to be granted in
each annual budget or such other authority as may be delegated to the Chief
Executive Officer by the Holdings partnership board). The partnership board of
Holdings may request capital contributions to be made in the absence of an
approved budget or more quickly than provided for in an approved budget, but
always subject to the Total Mandatory Contributions limit. The proposed budget
for 1997 has not yet been approved by the partnership board, however, the
Company is continuing to act under the authority of the 1996 approved budget as
adjusted pursuant to the Holdings partnership agreement. The Amended and
Restated Capital Contribution Agreement (the "Amended Agreement") was executed
effective October 2, 1996. The Amended Agreement recognized that through
December 31, 1995, approximately $2.2 billion of the Total Mandatory
Contributions had been contributed to Sprint Spectrum L.P., and designates that
approximately $1.0 billion of the balance of the Total Mandatory Contributions
shall be contributed to Sprint Spectrum L.P. As of June 30, 1997, $2.7 billion
had been contributed to Sprint Spectrum. The Company's business plan and the
financial covenants and other terms of the Secured Financing (defined below)
will require such additional equity financing prior to the end of 1998, absent a
new financing source. The $1.0 billion portion of the $4.2 billion not required
to be invested in the Company may be used by Holdings to fund its other
affiliate commitments and make other wireless investments. Amounts budgeted by
the Partners in future years will determine the extent to which the commitments
will actually be utilized.
In October 1996, the Company entered into a credit agreement with The Chase
Manhattan Bank, as administrative agent for a group of lenders, for a $2.0
billion senior secured credit facility (the "Bank Facility"). The proceeds of
the Bank Facility are to be used to finance working capital needs, subscriber
acquisition costs, capital expenditures and other general purposes of the
Company. The Bank Facility consists of a $300 million term loan commitment and a
revolving credit commitment of $1.7 billion. Of the $300 million term facility,
$150 million was drawn down subsequent to closing, and the remaining $150
million was drawn down in January, 1997. As of June 30, 1997, $350 million had
been borrowed and $100 million remained available under the revolving credit
facility. Availability under the Bank Facility will increase subject to the
Company meeting certain performance criteria.
Also in October 1996, the Company entered into credit agreements for up to an
aggregate of $3.1 billion of senior secured multiple drawdown term loan
facilities from two of its network infrastructure
<PAGE>
equipment vendors. As amended in April 1997, the Nortel facility will provide up
to $1.3 billion in senior secured loans. The Lucent facility, as amended in May
1997, will provide up to $1.8 billion in senior secured loans (together the
"Vendor Financing" and together with the Bank Facility, the "Secured
Financing"). The Company will use the proceeds from the Vendor Financing to fund
the purchase of the equipment and software manufactured by the vendors as well
as substantially all of the construction and ancillary equipment (e.g., towers,
antennae, cable) required to construct the Company's PCS network. These
facilities will serve as the primary financing mechanism for the buildout of the
network.
Borrowings under the Secured Financing are secured by the Company's interest in
WirelessCo, RealtyCo and EquipmentCo and certain other personal and real
property (the "Shared Lien"). The Shared Lien equally and ratably secures the
Bank Facility and the Vendor Financing. The Secured Financing is jointly and
severally guaranteed by WirelessCo, RealtyCo and EquipmentCo and is non-recourse
to the Partners and the Parents.
In August 1996, Sprint Spectrum L.P. and FinCo issued $250 million aggregate
principal amount of the 11% Senior Notes and $500 million aggregate principal
amount at maturity of 12 1/2% Senior Discount Notes (together, the "Notes"). The
Senior Discount Notes were issued at a discount to their aggregate principal
amount at maturity and generated proceeds of approximately $273 million. Cash
interest on the Senior Notes will accrue at a rate of 11% per annum and is
payable semi-annually in arrears on each February 15 and August 15, commencing
February 15, 1997. Cash interest will not accrue or be payable on the Senior
Discount Notes prior to August 15, 2001. Thereafter, cash interest on the Senior
Discount Notes will accrue at a rate of 12 1/2% per annum and will be payable
semi-annually in arrears on each February 15 and August 15, commencing February
15, 2002. FinCo was formed solely to be a co-obligor of the Notes. FinCo has
only nominal assets and no operations or revenues, and Sprint Spectrum L.P. will
be responsible for payment of the Notes. On August 15, 2001, Sprint Spectrum
L.P. will be required to redeem an amount equal to $384.772 per $1,000 principal
amount at maturity of each Senior Discount Note then outstanding ($192 million
in aggregate principal amount at maturity, assuming all of the Senior Discount
Notes remain outstanding at such date). The proceeds of approximately $509
million from the issuance of the Notes (net of approximately $14 million of
underwriting discounts, commissions, and offering expenses) were used to fund
capital expenditures, including the buildout of the nationwide PCS network, to
fund working capital requirements, to fund operating losses and for other
partnership purposes. Sprint purchased, and continues to hold, approximately
$183 million principal amount at maturity of the Senior Discount Notes.
Sources of funding for the Company's further financing requirements may include
additional vendor financing, public offerings or private placements of equity
and/or debt securities, commercial bank loans and/or capital contributions from
Holdings or the Partners. There can be no assurance that any additional
financing can be obtained on a timely basis and on terms acceptable to the
Company and within limitations contained in the Notes, the agreements governing
the Secured Financing and any new financing arrangements. Failure to obtain any
such financing could result in the delay or abandonment of the Company's
development and expansion plans and expenditures or the failure to meet
regulatory requirements. It also could impair the Company's ability to meet its
debt service requirements and could have a material adverse effect on its
business.
For the year-to-date period ended June 30, 1997, the Company used cash of $394
million in operating activities, which consisted of the operating loss of $477
million less depreciation and amortization of $123 million, an increase in
receivables, inventory and other assets of $52 million, offset by increases in
payables, accrued expenses and long-term accruals of $11 million. Cash used in
investing activities totaled $834 million, consisting of capital expenditures
and microwave relocation costs.
<PAGE>
Results of Operations
For the Three and Six Months Ended June 30, 1997
Operating Revenues/Margin
The Company commenced initial commercial operations for its PCS services in
certain MTAs late in the fourth quarter of 1996 and, as a result, has generated
minimal operating revenues. The negative margin from equipment sales results
from the Company's subsidy of handsets. Cost of service consists principally of
switch and cell site expenses, including site rental, utilities and access
charges. Prior to service launch, such costs were incurred during the network
buildout and testing phases. As markets launch, costs are incurred to provide
service in the related markets.
Selling Expenses
The Company's selling expenses for the second quarter of 1997 were $29.8 million
compared to $0.9 million for the second quarter of 1996. For the six months
ended June 30, 1997, selling expenses increased to $42.5 million from $0.9
million for the same six months of 1996. These increases were due to costs
incurred in preparation of and during the initial commercial service launch in
various markets. Such costs include participation with Sprint in an NFL
sponsorship, development and production expenses associated with advertisements
in various media (i.e., television, radio, print), and the development of
printed brochures to promote the Company's products and services. The Company
expects selling expenses will continue to increase as the Company expands its
sales and marketing activities.
General and Administrative
General and administrative expenses for the second quarter increased from $42.5
million in 1996 to $119.6 million in 1997. General and administrative expenses
for the six months ended June 30, 1996 and 1997 were $73.2 million and $224.1
million, respectively. Increases for both the three and six month periods were
due principally to increases in salary and related benefits, computer equipment
and related expenses and professional and consulting fees. Salaries and
benefits, computer equipment and related expenses increased due to an increase
in employee headcount. Professional and consulting fees increased due to the use
of consultants and other experts to assist with the continuing development and
enhancement of the Company's sophisticated information systems, continued
rollout and tailoring of training programs for the Company's sales force, and
various other projects.
Depreciation and Amortization
Depreciation and amortization expense for the second quarter of 1997 was $66.3
million compared to $0.4 million for the same period in the prior year.
Depreciation and amortization expense of $100.7 million for the six months ended
June 30, 1997, was an increase from $0.6 million for the same period in 1996 as
certain network equipment has been placed in service and amortization of PCS
licenses and microwave relocation costs in the launched markets commenced.
<PAGE>
Other Income/Expense
Interest Income/Expense
Interest income decreased from $1.0 million for the three months ended June 30,
1996 to $0.4 million for the three months ended June 30, 1997 as the average
daily invested cash balance decreased during the comparative periods due to the
receipt in the prior year of partner equity contributions in advance of capital
and operational requirements. Interest income increased from $0.9 million for
the six months ended June 30, 1996 to $1.3 million for the six months ended June
30, 1997 as the Company borrowed funds during the first quarter of the current
year in accordance with the terms of the loan agreements resulting in excess
cash balances.
Interest expense increased to $12 million for the three and six months ended
June 30, 1997, as the Company's construction activities declined during the
period as markets launched commercial service, resulting in the capitalization
of less than 100% of the interest expense incurred during the period.
Additionally, interest expense continues to increase as borrowings increase.
Other Income
Equity in loss of unconsolidated partnership for the three and six months ended
June 30, 1996 represents the Company's share of the losses in APC before the
ownership interest was transferred to Holdings on August 31, 1996. The Company
retained the rights and obligations under the affiliation agreement with APC. In
addition, the Company participates in an affiliation agreement with Cox PCS.
Fees earned under these agreements of $1.8 million and $2.9 million for the
three and six months ended June 30, 1997 are shown in Other income.
For the Three and Six Months Ended June 30, 1996
The Company incurred losses of $91 million and $158 million for the three and
six months ended June 30, 1996, respectively. These losses include equity in
loss of an unconsolidated subsidiary of $45 million and $81 million for the
three and six month periods, respectively. There was no amortization of PCS
licenses during the six-month period as PCS service had not been launched
commercially.
<PAGE>
PART I.
Item 2b.
SPRINT SPECTRUM FINANCE CORPORATION
(A Wholly-Owned Subsidiary of Sprint Spectrum L.P.)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Sprint Spectrum Finance Corporation ("FinCo"), a Delaware corporation, was
formed on May 21, 1996 and is a wholly-owned subsidiary of Sprint Spectrum L.P.
FinCo has nominal assets, does not conduct any operations and was formed to be a
co-obligor of the securities issued by the Company. Certain institutional
investors who might otherwise be limited in their ability to invest in
securities issued by partnerships by reasons of the legal investment laws in
their states of organization or their charter documents, may be able to invest
in the Company's securities because FinCo is a co-obligor. Accordingly, a
discussion of the results of operations, liquidity and capital resources of
FinCo are not presented.
<PAGE>
PART II.
Other Information
Item 1. Legal Proceedings
There were no reportable events during the quarter ended June 30, 1997.
Item 2. Changes in Securities
There were no reportable events during the quarter ended June 30, 1997.
Item 3. Defaults On Senior Securities
There were no reportable events during the quarter ended June 30, 1997.
Item 4. Submission of Matters to Votes of Security Holders
There were no reportable events during the quarter ended June 30, 1997.
Item 5. Other Information
There were no reportable events during the quarter ended June 30, 1997.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
3.1 Certificate of Limited Partnership of Sprint Spectrum L.P. (in-
corporated by reference to Form S-1 Registration Statement, Regi-
stration No. 333-06609, filed on June 21, 1996).
3.2 Amended and Restated Agreement of Limited Partnership of MajorCo,
L.P. (renamed Sprint Spectrum Holding Company, L.P.) dated Jan-
uary 31, 1996, among Sprint Spectrum, L.P. (renamed Sprint Enter-
prises, L.P.), TCI Network Services, Comcast Telephony Services,
and Cox Telephony Partnership incorporated by reference to Form
S-1 Registration Statement, Registration No. 333-06609, filed on
June 21, 1996).
3.3 Agreement of Limited Partnership of MajorCo Sub, L.P. (renamed
Sprint Spectrum, L.P.), dated as of March 28, 1995, among Major-
Co, L.P. and MinorCo, L.P. (incorporated by reference to Form S-1
Registration Statement, Registration No. 333-06609, filed on
June 21, 1996).
4.1 Senior Note Indenture, dated August 23, 1996, between Sprint
Spectrum L.P., Sprint Spectrum Finance Corporation, and The Bank
of New York, as Trustee (incorporated by reference to Form 10-Q,
filed on November 12, 1996).
4.2 Form of Senior Note (included in Exhibit 4.1).
4.3 Senior Discount Note Indenture, dated August 23, 1996, between
Sprint Spectrum L.P., Sprint Spectrum Finance Corporation, and
The Bank of New York, as Trustee (incorporated by reference to
Form 10-Q, filed on November 12, 1996).
4.4 Form of Senior Discount Note (included in Exhibit 4.3).
10.1 Amendment No. 1, dated as of May 29, 1997, to the Credit Agree-
ment, dated as of October 2, 1996, among Sprint Spectrum L.P.,
Lucent Technologies Inc., the several banks and other
<PAGE>
financial institutions and entities from time to time parties to
the Credit Agreement and Lucent Technologies Inc., as agent for
the Lenders.
10.2 First Amendment, dated as of April 30, 1997, to the Credit
Agreement, dated as of October 2, 1996, among Sprint Spectrum
L.P., Northern Telecom Inc., the several banks and other finan-
cial institutions and entities from time to time parties to the
Credit Agreement and Bank of America NT & SA, as agent for the
Lenders.
27 Financial data schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30,
1997.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPRINT SPECTRUM FINANCE COMPANY, L.P.
(Registrant)
By /s/ Robert M. Neumeister, Jr.
Robert M. Neumeister, Jr.
Chief Financial Officer
Dated: August 13, 1997
<PAGE>
Exhibit 10.1
Amendment No. 1 to Credit Agreement
Amendment No. 1, dated as of May 29, 1997 (this "Amendment No. 1"), to
the Credit Agreement (the "Credit Agreement"), dated as of October 2, 1996,
among Sprint Spectrum L.P., a limited partnership organized under the laws of
the State of Delaware (the "Borrower"), Lucent Technologies Inc. (the "Vendor"),
the several banks and other financial institutions and entities from time to
time parties to the Credit Agreement (together with the Vendor, the "Lenders")
and the Vendor, as agent for the Lenders under the Credit Agreement.
The Borrower and the Vendor, as sole Lender and Agent under the Credit
Agreement, have agreed to make the following amendments to the Credit Agreement.
1. Subsection 1.1 of the Credit Agreement is amended as follows:
(a) The following definition is added:
""Capitalized Interest Loan": is defined in subsection 2.7(d)."
(b) The definition of "Eligible Assignee" is amended by replacing such
definition in its entirety with the following:
""Eligible Assignee": (a) a commercial bank having
total assets in excess of $250,000,000, an insurance company
or other similar financial institution, (b) any other entity
which is (or which is managed by a manager which manages funds
which are) primarily engaged in making, purchasing or
otherwise investing in commercial loans or extending, or
investing in extensions of, credit for its own account in the
ordinary course of its business, which has total assets in
excess of $250,000,000, (c) any Investment Vehicle principally
engaged in investing in commercial loans or (d) Sprint
Corporation, or any Affiliate thereof; provided that (except
with respect to clause (d) of this definition) in no event may
any Person which is engaged in, or in the case of any Person
described in clause (b) of this definition, which is an
Affiliate of any Person engaged in, the telecommunications
service business in the United States be an Eligible Assignee,
and provided, further, that in no event may any trust or other
Person that is the issuer of direct or indirect beneficial
interests in the Loans (an "Investment Vehicle") become a
Lender unless (i) any rights of the holders of the beneficial
interests issued by such Investment Vehicle in respect of
votes, consents and other actions to be taken by the Lenders
under or in connection with this Agreement and the other Loan
Documents shall be limited so that the percentage of such
beneficial interests the holders of which are required to
approve any vote, consent or other action proposed to be made
or taken by such Investment Vehicle in its capacity as a
Lender in connection with this Agreement or any other Loan
Document shall be the same as the percentage of the Loans the
holders of which are required pursuant to subsection 9.1 to
approve such vote, consent or other action and (ii) the only
financial statements and other reports that such Investment
Vehicle and holders of beneficial interests shall be entitled
to receive from the Borrower shall be the annual audited and
quarterly unaudited financial statements required to be
delivered by the Borrower pursuant to subsection 5.1 (a) and
(b) and subsection 5.2(a) and (b) and any other documents
delivered by the Borrower pursuant to subsection 5.1 that
contain only publicly available information."
(c) The definition of "Requisite Lenders" is amended by replacing such
definition in its entirety with the following:
""Requisite Lenders": at any time (a) until the first
date upon which the Special Lenders hold in the aggregate
Loans and Unused Commitments in an aggregate amount less than
50% of the then outstanding Loans and Unused Commitments, (x)
Special Lenders who hold an aggregate of more than 50% of all
Loans and Unused Commitments held by Special Lenders and (y)
Lenders other than Special Lenders who hold an aggregate of
more than 50% of all Loans and Unused Commitments held by
Lenders other than Special Lenders and (b) thereafter, Lenders
the Percentages of which aggregate more than 50%."
(d) The following definition is added:
""Special Lenders": the Vendor and Sprint Corporation and any Affiliate of
Sprint Corporation."
2. Subsection 2.7(d) of the Credit Agreement is amended as follows:
(a) Clause (ii) of subsection 2.7(d) is amended by replacing it in
its entirety with the following:
"(ii) on any Interest Payment Date occurring during the
Interest Capitalization Period, such accrued interest shall be
capitalized and added to the principal amount of the Specified
Loan on which such capitalized interest shall have accrued,"
(b) The following sentence is added to the end of subsection
2.7(d):
"For purposes of clarification, any Loans (each being a
"Capitalized Interest Loan") made pursuant to this subsection
2.7(d) as a result of capitalized interest being added to the
principal amount of a Specified Loan shall, for purposes of
subsections 2.3(a) and 2.7(d), be deemed to be made in the
same Borrowing Year in which the Specified Loan was made
(including Capitalized Interest Loans on Specified Loans which
were originally Capitalized Interest Loans)."
3. Subsection 2.10 of the Credit Agreement is amended by replacing the
first sentence of such subsection in its entirety with the following:
"Except as provided in subsection 2.11, 2.15(b) or 2.16, each
payment (including each prepayment) by the Borrower on account
of (i) principal of the Loans shall be made pro rata according
to the respective outstanding principal amount of the Loans
then due and owing and (ii) interest on the Loans shall be
made pro rata according to the respective amounts of interest
on the Loans then due and owing."
4. Subsection 4.2(a) of the Credit Agreement is amended by replacing such
subsection in its entirety with the following:
"(a) Representations and Warranties. Each of the
representations and warranties made by the Borrower and each other Loan
Party in or pursuant to the Loan Documents, other than the
representations and warranties in subsection 3.18 of this Agreement,
shall be true and correct in all material respects on and as of such
date as if made on and as of such date."
5. Subsection 9.1 (a) of the Credit Agreement is amended by replacing
clause (i) thereof in its entirety with the following:
"(i) reduce the amount or extend the scheduled date of
maturity of any Lender's Loans or any installment thereof, or
reduce the stated rate of any interest or fees payable to such
Lender hereunder or extend the scheduled date of any payment
thereof or increase the amount or extend the expiry date of,
any Lender's Commitment, in each case without the consent of
such Lender, but any Lender may agree with the Borrower to any
of the foregoing solely with respect to such Lender's Loans or
Commitments,"
6. Subsection 9.1 of the Credit Agreement is amended by adding the follow-
ing subsection 9.1(c) and (d):
"(c) Notwithstanding any provision in this Agreement
to the contrary, if Sprint Corporation and its Affiliates
(collectively, "Sprint Affiliates") shall hold Loans
(excluding Capitalized Interest Loans) and Unused Commitments
in excess of $300,000,000 (such amounts in excess of
$300,000,000 being the "Excess Amount"), the Excess Amount
shall not be entitled to vote on, and shall be disregarded
with respect to, any matters for which the approval of the
Requisite Aggregate Lenders or the Requisite Lenders is
required or for matters covered by subsections 9.1 (b) and
9.19. For purposes of the foregoing, the Excess Amount shall
be deducted from the total of all Loans and Unused Commitments
held by all Lenders and from the amount of Loans and Unused
Commitments held by Sprint Affiliates. This subsection 9.1 (c)
may be amended only by the approval of Lenders other than
Special Lenders who hold an aggregate of more than 50% of all
Loans and Unused Commitments held by Lenders other than
Special Lenders.
(d) The Borrower represents and warrants that the
definition of Requisite Aggregate Lenders contained in the
Other Vendor Credit Facility is identical to the definition of
Requisite Aggregate Lenders in this Agreement. Notwithstanding
any provision in this Agreement to the contrary, the
definition of Requisite Aggregate Lenders contained in this
Agreement and in the Other Vendor Credit Facility shall not be
amended without the approval of the Requisite Aggregate
Lenders."
7. Subsection 9.6(c) of the Credit Agreement is amended as follows:
(a) The numerical term "$10,000,000" is replaced with "$5,000,000"
in both places it appears in subsection 9.6(c).
(b) The following proviso is added to the end of the first sen-
tence of subsection 9.6(c):
", provided, further, that assignments in lesser amounts may
be made in connection with the primary syndication of the
Tranche I Loans (as defined in Schedule I to this Agreement)"
(c) The following sentence is added to the end of subsection
9.6(c):
"Notwithstanding the foregoing, a transfer or assignment (A)
of Capitalized Interest Loans from one Lender to an existing
Lender or the Vendor made at the time such Capitalized
Interest Loan is made pursuant to subsection 2.7(d) shall (i)
not be subject to any minimum amount of assignment, (ii) be
made by the assigning Lender and the Assignee and recorded by
the Agent without executing an Assignment and Acceptance
provided the Agent is notified prior to such assignment, and
(iii) not require notice to the Borrower, and (B) of Loans
and/or Commitments by a Lender (other than the Vendor) to (i)
another Lender shall not require notice to the Borrower prior
to such transfer or assignment or (ii) an Eligible Assignee
that is not a Lender shall not require prior notice to the
Borrower provided the Borrower is given written notice within
three (3) Business Days following such transfer or assignment.
Nothing contained herein shall prohibit the transfer or
assignment of Loans and Commitments separately from one
another."
8. Subsection 9.6(e) of the Credit Agreement is amended by replacing it in
its entirety with the following:
"(e) Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender and an Assignee (and, in the
case of an Assignee that is not then a Lender, by the Agent),
together with payment by the assignor or assignee Lender, as
agreed between them, to the Agent of a registration and
processing fee set forth below, the Agent shall (i) promptly
accept such Assignment and Acceptance and (ii) on the
effective date determined pursuant thereto record the
information contained therein in the Register and give notice
of such acceptance and recordation to the Lenders and the
Borrower. The registration and processing fee shall be $500
for any assignment to an existing Lender, $2,000 for any
assignment to an Assignee which immediately prior to such
assignment is not a Lender (unless, in either case, the
Assignee, the Assignor and the Agent agree to a lesser
amount), and zero for any assignment of Capitalized Interest
Loans from one Lender to an existing Lender or to the Vendor
which is made at the time such Capitalized Interest Loan is
made pursuant to subsection 2.7(d), provided the Agent is
notified prior to such assignment."
9. Subsection 9.6(f) of the Credit Agreement is amended by replacing
clauses (i) and (ii) contained in the proviso of such subsection in
their entirety with the following:
"disclosures of information to any Transferee or prospective
Transferee that is an Investment Vehicle shall be limited as
provided in the definition of "Eligible Assignee" in
subsection 1.1."
10. Subsection 9.13 is amended by replacing clause (ii) thereof in its
entirety with the following:
"(ii) to any prospective Transferee which is an Eligible
Assignee and which shall have agreed to comply with the
provisions of this subsection,"
11. (a) Section 1 of Schedule I to the Credit Agreement is amended by re-
placing it in its entirety with the following:
"Certain Definitions.
"Applicable Margin": the following with respect to each
tranche of Loans:
Tranche I Loans and Tranche II Loans: for ABR Loans, 1.875%
and for Eurodollar Loans, 2.875%; and
Tranche III Loans: for ABR Loans, 2.00% and for Eurodollar
Loans, 3.00%.
"Tranche I Commitments": Commitments to make Tranche I Loans.
"Tranche I Loans": the first $500,000,000 of Loans made during
the first Borrowing Year under the Vendor Commitment, but ex-
cluding any Capitalized Interest Loans.
"Tranche II Loans": After all the Tranche I Loans have been
made, the first $300,000,000 of Loans made at any time during
the Commitment Period under the Vendor Commitment, but
excluding any Capitalized Interest Loans.
"Tranche III Loans": all Loans (including Capitalized Interest
Loans) which are not Tranche I Loans or Tranche II Loans.
"Vendor Commitment": the obligation of the Vendor to make
Loans to the Borrower under subsection 2.1 in the aggregate
principal amount not to exceed $1,800,000,000; provided that
the aggregate principal amount of the Loans made (excluding
Capitalized Interest Loans) shall not exceed $1,500,000,000
through December 31, 1997."
(b) Section 4 of Schedule I to the Credit Agreement is amended by replacing
it in its entirety with the following:
"Fees.
The Borrower agrees to pay to the Agent, for the account of each Lender
holding Tranche III Loans, a facility fee equal to 1% per annum on the
daily amount of such Lender's Tranche III Loans outstanding, payable
quarterly in arrears on the last day of each March, June, September and
December and the date such Tranche III Loans are paid in full and the
Commitments are terminated."
(c) Paragraph (k) of Section 5 of Schedule I to the Credit Agreement is amended
by replacing clause (iii) thereof in its entirety with the following:
"(iii) The Vendor will not assign the Vendor Commitment or
Loans (whether in connection with a Bank Syndication or
otherwise) to persons (including Investment Vehicles) other
than commercial banks, prime rate funds and Eligible Assignees
described in clause (d) of the definition of Eligible Assignee
if, after giving effect thereto, the amount of Loans and
Unused Commitments held by such other persons exceeds (A)
prior to the Transition Date (as defined below) the lesser of
(x) 49% of the aggregate amount of Loans and Unused
Commitments (excluding from such calculation any Loans that
have been exchanged for Refinancing Securities) and (y)
$750,000,000, or (B) after the Transition Date, $750,000,000."
(d) Paragraph (1) of Section 5 of Schedule I to the Credit Agreement is amended
by replacing such subsection in its entirety with the following:
"(1 ) The Borrower and the Vendor acknowledge that it is the desire of
the Vendor to assign the Loans and/or Vendor Commitment as promptly as
practicable and that it is the desire of the Borrower for such
assignments to be effected in a manner that (i) does not adversely
affect the Borrower's own financing activities, (ii) does not provide
to creditors other than commercial banks, prime rate funds and Eligible
Assignees described in clause (d) of the definition of Eligible
Assignee and (subject to the restrictions set forth in clause (iii) of
paragraph (k) above) other Eligible Assignees, covenants,
representations and warranties, defaults and voting provisions that are
more restrictive on the Borrower than those applicable to the High
Yield Debt and (iii) to the extent consistent with market demands,
provides economic benefit to the Borrower as provided in paragraphs (h)
and (i) above. Accordingly, the Borrower and the Vendor agree to work
together in good faith to accomplish such desires. In this connection,
the Vendor shall deliver to the Borrower at least every six months a
description of the Vendor's then current plans with respect to the sale
of the Loans and the Vendor Commitment. Furthermore, the Vendor agrees
that if it assigns Loans directly to an Investment Vehicle, whether
through a Syndication Assignment or otherwise, (I) the provisions of
paragraph (k)(iii) will apply to such assignment and (II) only Eligible
Assignees will be holders of the securities issued by such Investment
Vehicle."
(e) Section 6 of Schedule I to the Credit Agreement is deleted in its en-
tirety and replaced with the foregoing:
"Additional Tranches.
Sections 1 and 4 of this Schedule I may be amended or modified with the
consent of the Borrower by (i) adding one or more additional tranches
(and changing the Applicable Margin for such additional tranches), (ii)
changing the amount of any existing tranche, (iii) changing the
Applicable Margin for any existing tranche, (iv) changing or
eliminating the fees in Section 4 of this Schedule I for any existing
tranche, and/or (v) specifying whether any additional tranche shall be
entitled to the fees set forth in Section 4 in this Schedule I;
provided that (A) the approval of all the Lenders holding Loans and
Unused Commitments of an existing tranche shall be required to make any
of the foregoing changes or amendments affecting such existing tranche
and (B) no approval shall be required by any Lenders which do not hold
any Loans or Unused Commitments for the affected tranche."
12. Pursuant to subsection 8.9 of the Credit Agreement, the Vendor
appoints, and the Borrower approves the appointment of, The Chase Manhattan Bank
to serve as Agent. For purposes of Section 9.2, address for notices to the Agent
shall be:
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention: John Haltmaier, 37th Floor
Fax: (212) 270-4548
13. The Borrower confirms that the representations and warranties set forth
in Section 3 of the Credit Agreement, other than the representations and
warranties in subsection 3.18 of the Credit Agreement, are true and
correct in all material respects as of the Effective Date (as defined
below), and no Default or Event of Default has occurred and is continuing
as of the Effective Date.
14. The Borrower and the Lenders confirm that Section 5 of Schedule I to the
Credit Agreement shall apply only to sales, assignments and other
transfers of Loans and Commitments by the Vendor, and no other Lenders
are entitled to any of the benefits or subject to any of the obligations
of such section.
15. Notwithstanding anything in the Credit Agreement to the contrary, the
registration and processing fees set forth in Section 9.6(e) of the
Credit Agreement are waived for (a) the assignment by the Vendor of the
Tranche I Loans and Tranche I Commitments to Goldman Sachs Credit
Partners, L.P. ("GSCP"), (b) the initial assignment of Tranche I Loans
and Tranche I Commitments by GSCP to other Lenders, and (c) the
assignment by the Vendor of the Tranche II Loans and the Commitments to
make Tranche II Loans.
16. On the date of the initial assignment by the Vendor of the Tranche I
Loans to GSCP (or upon the initial assignment of the Tranche I Loans by
GSCP to other Lenders if not the same Business Day as the Vendor's
assignment to GSCP) (the "Syndication Date"), the Interest Period with
respect to the Tranche I Loans which are Eurodollar Loans shall end,
all accrued and unpaid interest which has not been previously capitalized
on such Tranche I Loans shall be capitalized as of the Syndication Date,
and the Borrower may continue all such Eurodollar Loans as one or more
new Eurodollar Loans with such Interest Period or Interest Periods as
the Borrower may determine in accordance with the Credit Agreement. The
Lenders waive all claims to any breakage costs or other indemnities under
subsection 2.14 of the Credit Agreement for ending the Interest Period
with respect to existing Eurodollar Loans on the Syndication Date.
17. Exhibit D of the Credit Agreement is deleted in its entirety, and on page
iii of the Table of Contents of the Credit Agreement, opposite "Exhibit
D", the description "Form of Confidentiality Agreement" is replaced in
its entirety with "[Intentionally Omitted]".
18. This Amendment No. 1 is being made pursuant to subsection 9.1 (a) of the
Credit Agreement, and except as provided herein, the Credit Agreement
shall remain unchanged and in full force and effect. This Amendment No. 1
shall be effective upon the Syndication Date (the "Effective Date"). Upon
the Effective Date of this Amendment No. 1, each reference in the
Credit Agreement to "this Agreement", "hereunder", "hereof" or words of
similar meaning referring to the Credit Agreement, and each reference
in any other Loan Document to the Credit Agreement, however referenced,
shall mean the Credit Agreement as amended by this Amendment No. 1.
This Amendment No. 1 may be executed by one or more of the parties to the
Credit Agreement on any number of separate counterparts (including by
facsimile transmission), and all counterparts taken together shall be
deemed to constitute one and the same instrument. This Amendment No. 1
shall be governed by, and construed and interpreted in accordance with,
the laws of the State of New York. This Amendment No. 1 represents the
entire agreement of the parties hereto with respect to the subject
matter hereof.
SPRINT SPECTRUM L.P.
By: Sprint Spectrum Holding Company, L.P., its
general partner
By: /s/ Robert E. Sleet, Jr.
Title: Vice President and
Treasurer
LUCENT TECHNOLOGIES INC.. as
Lender and as Agent
By: /s/ Florence L. Walsh
Title: Vice President and Treasurer
Accepted with respect to appointment as Agent,
The Chase Manhattan Bank
By: /s/ John P. Haltmaier
Title: Vice President
FIRST AMENDMENT
FIRST AMENDMENT, dated as of April 30, 1997 (this
"Amendment"), to the Credit Agreement, dated as of October 2, 1996 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among Sprint Spectrum L.P., a limited partnership organized under the laws of
the State of Delaware (the "Borrower"), Northern Telecom Inc. (the "Vendor"),
the several banks and other financial institutions and entities from time to
time parties thereto (together with the Vendor, the "Lenders") and Bank of
America NT & SA, as agent for the Lenders, and any successor to Bank of America
NT & SA in such capacity (the "Agent").
WITNESSETH:
WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to
make certain loans to the Borrower; and
WHEREAS, the Vendor has requested that certain provisions of the Credit
Agreement be modified in the manner provided for in this Amendment in order to
facilitate the syndication of Loans and Commitments under the Credit Agreement
in multiple tranches;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms. Terms defined in the Credit Agreement and used herein
shall have the meanings given to them in the Credit Agreement. Definitions
herein of terms used in the Credit Agreement as amended by this Amendment
but not defined therein shall be deemed incorporated into the Credit Agreement
as amended hereby.
2. Amendments to Credit Agreement. (a)The following defined terms are hereby
added to subsection 1.1 of the Credit Agreement.
"Facility A Advances": The first $600,000,000 of Cash Advances and/or
Credit Advances other than Qualcomm Advances; provided that Facility A
Advances shall not include any Cash Advances or Credit Advances for which the
Borrowing Date occurs after March 31, 1999.
"Facility A Lender": Any Lender designated as having a "Facility A
Funding Percentage" in the Assignment and Acceptance pursuant to which such
Lender becomes a Lender hereunder.
"Facility B Advances": The first $500,000,000 of Cash Advances and/or
Credit Advances, other than Qualcomm Advances, made after all Facility A Ad-
vances have been made.
"Facility B Lender": Any Lender designated as having a "Facility B
Funding Percentage" in the Assignment and Acceptance pursuant to which such
Lender becomes a Lender hereunder.
"Qualcomm": QUALCOMM Incorporated and its successors and assigns.
"Qualcomm Advances": Each Cash Advance or Credit Advance (or portion
thereof) that is to be financed directly or indirectly by Qualcomm pursuant
to a separate agreement between the Vendor and Qualcomm, as notified by the
Vendor to the Agent pursuant to subsection 2.2.(f).
"Vendor Lender": Until another Lender is designated as such in an
Assignment and Acceptance pursuant to which such Lender becomes a Lender here-
under, the Vendor,and thereafter, the Lender as designated.
(b) The definition of "Funding Percentage" in subsection 1.1 of the Credit
Agreement is hereby amended to read in its entirety as follows:
"Funding Percentages": As to any Lender at any time, (a) in the case
of a Facility A Advance, the "Facility A Funding Percentage", if any, designated
for such Lender in the Assignment and Acceptance pursuant to which such Lender
became a Lender hereunder, (b) in the case of a Facility B Advance, the
"Facility B Funding Percentage", if any designated for such Lender in the
Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder, (b) in the case of a Facility B Advance, the "Facility B Funding
Percentage", if any designated for such Lender hereunder, (c) in the case of
a Qualcomm Advance, the "Qualcomm Funding Percentage", if any, designated for
such Lender hereunder (provided that prior to receipt of any Assignment and
Acceptance designating a Qualcomm Funding Percentage, the Qualcomm Funding
Percentage of the Vendor shall be 100% and the Qualcomm Funding Percentage of
each other Lender shall be zero); and (d)in the case of any other Credit Advance
or Cash Advance, the Funding Percentage of the Vendor Lender shall be 100% and
the Funding Percentage of each other Lender shall be zero.
(c) The following subsection 2.2(f) is hereby added to the Credit Agreement:
(f) If any Borrowing Notice requests that a Cash Advance or Credit
Advance be made to finance amounts due under invoices submitted
to the Borrower by the Vendor pursuant to the Vendor Procurement
Contract, the Agent shall promptly notify the Vendor and provide
the Vendor with the information provided by the Borrower
pursuant to subsection 2.2(b) or (c) above, as applicable.
Following receipt of such information, the Vendor shall promptly
notify the Agent of the amount of such requested Cash Advance
or Credit Advance that represents a Qualcomm Advance, if any,
(d) The first sentence of subsection 2.10 of the Credit Agreement is
amended to read in its entirety as follows:
Except as provided in subsection 2.11, 2.15(b) or 2.16, each pay-
ment (including each prepayment) by the Borrower on account of (a) principal
of the Loans shall be made pro rata according to the outstanding principal
amount of the Loans then due and owing and (b) interest of the Loans shall be
made pro rata according to the outstanding amounts of interest on the Loans
then due and owing.
(e) Exhibit C to the Credit Agreement is hereby deleted and replaced
with Exhibit C attached to this Amendment.
3. Effectiveness. This Amendment shall become effective
upon receipt by the Agent of counterparts hereof, duly executed and delivered by
the Borrower, the Requisite Lenders and the Agent.
4. Notice of Conversion of Participation Interests into Assignments. The
Borrower hereby acknowledges notice, pursuant to clause (ii) of the last
sentence of subsection 9.6(c) of the Credit Agreement, of the assignment
of Loans and Commitments on the date hereof by the Vendor to the entities
holding participation interests in Loans and/or Commitments of the date hereof
(as setforth in the Assignment and Acceptance forms provided separately
to the Borrower), and to the extent of the notice requirement in clause (i)
of such last sentence would prohibit such assignments, the Borrower hereby
waives such notice requirement.
5. No Other Amendments; Confirmation. Except as expressly amended, modified
and supplemented hereby, the provisions of the Credit Agreement are and shall
remain in full force and effect.
6. Governing Law; Counterparts. (a) This Amendment and
the rights and obligations of the parties hereto shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New York.
(b) This Amendment may be executed by one or more of the
parties to this Amendment on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Amendment signed by all the parties
shall be lodged with the Borrower and the Agent. This Amendment may be delivered
by facsimile transmission of the relevant signature pages hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective proper and duly authorized
officers as of the day and year first above written.
SPRINT SPECTRUM L.P.
By: Sprint Spectrum
Holding Company, L.P.,
its general partner
By: /s/ Robert E. Sleet, Jr.
Title: Vice President & Treasurer
NORTHERN TELECOM INC. as Lender
By: Stephen Martin
Title: Vice President-Customer Finance
BANK OF AMERICA NT&SA, as Agent
By: /s/ Leandro Balidoy
Title: Vice President
<PAGE>
Exhibit A
[To be provided at a later date].
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 100
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 100
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 100
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 100
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
