This section describes the material terms of the amended and restated commitment letter, the facilities thereunder and the financing matters agreement. The description in this section and elsewhere in this joint consent solicitation statement/prospectus is qualified in its entirety by reference to the complete text of the amended and restated commitment letter and the financing matters agreement, each of which is incorporated by reference into this joint consent solicitation statement/prospectus. This summary does not purport to be complete and may not provide all of the information about the financing of the merger transactions that might be important to you. We encourage you to read the amended and restated commitment letter and the financing matters agreement carefully and in their entirety.
The completion of the merger transactions is not conditioned on T-Mobile’s ability to obtain financing.
T-Mobile currently intends to repay or redeem approximately $10.3 billion of Sprint’s outstanding debt and to assume approximately $30.0 billion of Sprint’s outstanding debt in connection with the merger transactions. T-Mobile also has agreed to repay or redeem approximately $8.5 billion of existing debt provided by Deutsche Telekom. Such debt includes T-Mobile’s secured and unsecured revolving credit facilities provided by Deutsche Telekom which are assumed to have an aggregate outstanding balance of $500 million at closing. T-Mobile expects to fund these repayments and redemptions, as well as fees and expenses relating to the merger transactions, through a combination of T-Mobile’s and Sprint’s cash on hand and the proceeds of additional debt financing. Such additional debt financing could take several forms, including among others, borrowing under the senior secured credit facilities or the issuance of secured or unsecured notes by T-Mobile USA in lieu of or in addition to borrowing under the bridge facilities (as defined below).
Commitment Letter
In connection with entry into the business combination agreement, T-Mobile USA entered into a commitment letter, dated as of April 29, 2018 (which we refer to as the “original commitment letter”), with Barclays Bank PLC, Credit Suisse AG, Deutsche Bank AG, Goldman Sachs Bank USA, Morgan Stanley Senior Funding, Inc., Royal Bank of Canada and certain of their respective affiliates. On May 15, 2018, T-Mobile USA amended and restated the original commitment letter pursuant to an amended and restated commitment letter (which we refer to as the “amended and restated commitment letter”), with Barclays Bank PLC, Credit Suisse AG, Deutsche Bank AG, Goldman Sachs Bank USA, Morgan Stanley Senior Funding, Inc., Royal Bank of Canada, BNP Paribas, Commerzbank AG, Credit Agricole Corporate and Investment Bank, The Toronto-Dominion Bank, Wells Fargo Bank, National Association, Banco Santander, S.A., Societé Generale, SunTrust Bank, National Westminster Bank plc, U.S. Bank National Association and certain of their respective affiliates (which we refer to as the “commitment parties”).
Pursuant to the amended and restated commitment letter, the commitment parties committed to provide up to $38.0 billion in secured and unsecured debt financing, including a $4.0 billion secured revolving credit facility (which we refer to as the “revolving credit facility”), a $7.0 billion secured term loan facility (which we refer to as the “term loan facility” and, together with the revolving credit facility, the “senior secured credit facilities”), a $19.0 billion secured bridge facility (which we refer to as the “secured bridge facility”) and a $8.0 billion unsecured bridge facility (which we refer to as the “unsecured bridge facility” and, together with the secured bridge facility, the “bridge facilities”; and the bridge facilities together with the senior secured credit facilities, the “facilities”). As permitted by the terms of the amended and restated commitment letter, on May 22, 2018, T-Mobile USA delivered a notice to the commitment parties pursuant to which the entire $8.0 billion unsecured bridge facility was reallocated to be part of the secured bridge facility, increasing the size of the secured bridge facility to $27.0 billion. Subsequently, and also as permitted by the terms of the amended and restated commitment letter, on June 6, 2018, T-Mobile USA delivered a notice to the commitment parties pursuant to which the commitments under the secured bridge facility decreased by $8.0 billion, such that the remaining size of the secured bridge facility is $19.0 billion.
The funding of the facilities is subject to the satisfaction of certain conditions, including the completion of the merger transactions. The facilities will be available in a single drawing on the date on which the funding conditions of the amended and restated commitment letter are satisfied or waived (which we refer to as the “facilities closing date”), except that the revolving credit facility will be available for borrowing by T-Mobile USA from time-to-time thereafter. The proceeds of the facilities will be used to refinance certain existing debt of T-Mobile, Sprint and their respective subsidiaries in connection with the merger transactions, and for working capital needs and general corporate purposes of the combined company. The commitments to provide the facilities will terminate in the event that the closing date does not occur on or before 11:59 p.m. (New York time) on the outside date (or, if the outside date is extended, then on such extended outside date). The commitments to provide the facilities will also terminate on the earliest of (1) the valid termination of the business combination agreement in accordance with its terms or (2) the completion of the merger with the use of the facilities (after the funding thereof) or without the use of the facilities (unless the commitment parties have failed to fund in breach of their obligations under the amended and restated commitment letter).
Term Loan Facility
The term loan facility is expected to mature seven years after the facilities closing date and to amortize at a rate of 1.0% per annum, payable quarterly. Borrowings under the term loan facility will bear interest, at T-Mobile USA’s option, at either a base rate or LIBOR, in each case plus an applicable margin to be determined during syndication of the term loan facility. The term loan facility is expected to be prepayable at par at any time, subject to a 1.00% penalty in connection with certain repricing events within six months of the facilities closing date.
Revolving Credit Facility
The revolving credit facility is expected to mature five years after the facilities closing date and not to be subject to any scheduled amortization. Borrowings under the revolving credit facility will bear interest, at T-Mobile USA’s option, at either a base rate or LIBOR, in each case plus an applicable margin to be determined during syndication of the revolving credit facility. Additionally, from and after the facilities closing date, T-Mobile USA expects to pay a commitment fee calculated on the average daily unused portion of the revolving credit facility at a rate per annum of 0.375%, with one 0.125% step-up and one 0.125% step-down corresponding to certain first lien secured net leverage ratios to be agreed. The revolving credit facility is expected to be prepayable at any time without penalty. The revolving credit facility is also expected to include a $1.0 billion subfacility for letters of credit. The revolving credit facility is expected to include a financial maintenance test requiring T-Mobile USA to maintain a first lien secured net leverage ratio of not greater than 3.30 to 1.00, tested quarterly.
Secured Bridge Facility
The secured bridge facility is expected to mature on the date that is 364 days after the facilities closing date, subject to up to two extensions to (1) 546 days after the facilities closing date and (2) 728 days after the facilities closing date, in each case at T-Mobile USA’s election and subject to certain conditions, including payment of an extension fee. Borrowings under the secured bridge facility will bear interest, at T-Mobile USA’s option, at either a base rate or LIBOR, in each case plus an applicable margin. The applicable margin will initially be 0.25% for base rate loans and 1.25% for LIBOR loans, with step-ups of 0.25% for each three-month period subsequent to the initial three-month period after the closing of the merger transactions. The commitments under the secured bridge facility will be reduced, or the loans thereunder will be required to be prepaid, if, among other things, T-Mobile USA or its subsidiaries, obtains certain debt financing or completes certain asset sales, subject to customary limitations and exceptions. The secured bridge facility is not expected to require amortization. The secured bridge facility may be prepaid at any time without penalty.
Financing Matters Agreement
In connection with the entry into the business combination agreement, Deutsche Telekom and T-Mobile USA entered into financing matters agreement, dated as of April 29, 2018 (which we refer to as the “financing matters agreement”). Pursuant to the financing matters agreement, Deutsche Telekom agreed, among other things, to consent to the incurrence by T-Mobile USA of secured debt in connection with and after the completion of the merger. In connection with the foregoing consents, T-Mobile made an upfront payment to Deutsche Telekom of $7 million, and upon completion of the merger, T-Mobile will make additional payments to Deutsche Telekom of $20 million. Further, Deutsche Telekom agreed to a lockup on sales of T-Mobile USA’s $1.25 billion of 5.125% senior notes due 2025 (which we refer to as the “2025 Notes”) and $1.25 billion of 5.375% senior notes due 2027 (which we refer to as the “2027 Notes”) until the earlier of April 15, 2020 or the date on which the business combination agreement is terminated. In addition, T-Mobile USA agreed, among other things, to repay and terminate, upon the closing of the merger transactions, certain of its existing debt provided by Deutsche Telekom, including the $4.0 billion term loan facility, $2.0 billion of T-Mobile USA’s 5.300% senior notes due 2021 and $2.0 billion of T-Mobile USA’s 6.000% senior notes due 2024 as well as the $1.5 billion secured revolving credit facility of which $445 million is drawn as of March 31, 2018, and $1.0 billion unsecured revolving credit facility of which $0 is drawn as of March 31, 2018, in each case, without any prepayment premium or penalty. T-Mobile USA and Deutsche Telekom also agreed, upon the closing of the merger transactions, to amend the 2025 Notes and the 2027 Notes to change the maturity dates thereof to April 15, 2021 and April 15, 2022, respectively.
