MetroPCS has responded to some of PSAM's points in its own presentations and proxy materials.
The company said that leverage of the combined entity would be in line with peers. There is no comparable market for the debt raised from Deutsche Telekom but the terms were set through a market-based pricing mechanism, avoid fees and near-term maturities, MetroPCS said. If adjusted for the $1.5 billion in cash payment, the split of the combined entity would be less favorable to MetroPCS -- 17% to 24% rather than the 26% in the current terms and MetroPCS is valued at a premium to its likely standalone valuation, the company said.
More filings with the Securities and Exchange Commission are sure to follow. Paulson & Co., with 9.9% of MetroPCS, said in a March 1 13D filing with the SEC that it opposes the current deal. Paulson said the combination makes strategic sense, but due to excessive leverage and high interest rate on the intercompany debt, it will vote against it. Paulson did outline a path to gaining its support. The fund said a reduction of the new company's debt by $6.6 billion and a lowering of its interest rate of 4.2% would win its support. Paulson would also consider a combination of debt reduction, added cash and/or a higher exchange ratio for MetroPCS shareholders, according to the filing.
Macquarie Group Ltd. analyst Kevin Smithen in a report agreed that a reduction of the debt at the new entity would be preferable and a boost to DT's equity valuation. Macquarie said based on meetings with top shareholders there is a good chance the deal does not win support.The opinions of proxy advisers could end up having some weight on the shareholder vote.
Written by Scott Stuart in New York