Sprint Will Raise $2 Billion In Debt, May Use to Fund Partner Clearwire

[jpkjeff]

(Via Bloomberg)

 

Sprint Will Raise $2 Billion in Debt, May Use to Fund Partner Clearwire

 

By Scott Moritz and Sapna Maheshwari - Feb 27, 2012 5:01 PM CT[/color]

Sprint Nextel Corp. (S), the third- largest U.S. wireless operator, said it plans to sell $2 billion in notes to help pay for refinancing, network upgrades and possible funding for its wireless partnerClearwire Corp. (CLWR)

Sprint will sell notes due in 2017 and 2020 through a private placement, according to a statement today. The sale, to be completed March 1, includes five-year notes at 9.13 percent and eight-year debt, which will be guaranteed by Sprint units, at 7 percent, the Overland Park, Kansas-based company said later in a separate statement included in a regulatory filing.

Sprint raised $4 billion through a debt offering in November to help with network spending and financing for Clearwire. The return trip to capital markets shows Sprint is raising cash to cover the growing costs of upgrading its wireless network to higher-speed technology and selling mobile devices that require subsidies, such as Apple Inc. (AAPL)’s iPhone. Sprint, which has lost money for the last five years, is struggling to compete against larger rivals AT&T Inc. andVerizon Wireless.

MetroPCS Abandoned

 

The move comes after Sprint’s board voted down a possible acquisition of the smallerMetroPCS Communications Inc. (PCS), a person familiar with the plan said last week. The board decided the stock and cash transaction, which may have cost as much as $8 billion including debt, would have been too expensive given the current level of Sprint’s stock price.

Sprint rose 3.2 percent to $2.55 at the close in New York. The stock has dropped 41 percent in the past 12 months.

The carrier has a four-year $15.5 billion commitment to pay Apple for the iPhone and in its annual report filed today, Sprint says it has $29.5 billion in additional payment commitments though 2017.

Sprint is graded B1 with a “negative” outlook by Moody’s Investors Service and an equivalent B+, also with a “negative” outlook by Standard & Poor’s, according to data compiled by Bloomberg.

 

The last time Sprint sold eight-year notes was in August 2009, when it issued $1.3 billion of 8.375 percent securities due in August 2017, Bloomberg data show. The debt was assigned a Ba2 from Moody’s at the time.

Today’s eight-year debt is expected to have a Ba3 grade and BB- from S&P, said the person with knowledge of the offering. The five-year debt, which is not guaranteed, is expected to be rated B3 by Moody’s and B+ by S&P, the person said.

 

The securities due August 2017 traded at 98.3 cents on the dollar to yield 8.78 percent as of 1:01 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority

Edited February 28, 2012 by jpkjeff

[S4GRU]

I'm working on this article now. Thanks for posting!

 

- Robert

[legion125]

Here's my editorial/rant, perhaps Roberts article will explain more. Clear needed $600 million to fully convert its network to LTE. Clear gets that amount and then some and will only convert towers at Sprints request to shore up NV/LTE sites. I've been keeping informal track of Clears MVNO/MVNE acquisitions and I'm not seeing a whole lot even though LS2 is practically belly up. Because of the iPhone, Clear is losing revenue since the iPhone doesn't translate into WiMax sales which Clear gets $10/phone.

 

Now Sprint is going back to the debtors market for more cash and I'm pretty sure the majority of it is to prop Clear up for the remainder of the year. Why won't Clear retrofit it's entire network in order to gain more wholesale business? Why is their no mention of Clear cutting back on overhead and expenses? What is Sprint going to do with this blackhole of a business that continues to suck the life out of it?

 

Why, why, why? This doesn't meet any business model I'm aware of, not even one that needs life support. Answer these questions and we'll know if Sprint will survive in its present incarnation.

[S4GRU]

Good questions. My article does not explain your points. I wouldn't mind some answers myself.

[BenChase7]

Good questions. My article does not explain your points. I wouldn't mind some answers myself.

 

If this money is to fund Clear, 2 Billion just seems like way to much. I thought Clear already had the funding they wanted/needed for their initial LTE plans. Ok.. so maybe their budget is/was a bit off... so give em a few hundred million bucks more... but, 2 Billion? Just seems like a lot. Is there a possibility that there is more to this story then we're hearing? (I'm inclined to believe so.)

[S4GRU]

I think what the issue here is, is that Sprint has committed that they would give Clearwire all this money since December, but it actually doesn't have the cash to do it. This debt raising just actually is the means to get the money it has already committed to Clearwire. That's what I think.

[marioc21]

I think what the issue here is, is that Sprint has committed that they would give Clearwire all this money since December, but it actually doesn't have the cash to do it. This debt raising just actually is the means to get the money it has already committed to Clearwire. That's what I think.

 

Also note that Sprint has about $1.7 billion in debt due in 2013. Some if not most of the new debt could go towards paying off the existing debt and giving themselves more breathing room. We won't know that until their Q1 financials are released. Whatever they're doing the market seems to like it. Sprint's stock price is up $0.30/share in the last week.

[S4GRU]

 

Also note that Sprint has about 1.7 billion in debt due in 2013. Some if not most of the new debt could go towards paying off the existing debt and giving themselves more breathing room. We won't know that until their Q1 financials are released. Whatever they're doing the market seems to like it. Sprint's stock price is up 0.30/share in the last week.

 

Sprint did say in their press release that the would be using in part some of the proceeds to pay existing debts (in essence refinancing). So this definitely makes sense.

 

Posted via Forum Runner

[ericdabbs]

I would much rather use the 2 billion to help accelerate NV and hire more crews for each of the vendors particularly A/L and Samsung. NV appears to be slow right now because Sprint is focusing on all the large markets first. Once these are done It will be interesting to see how quickly NV progresses once they move onto the secondary markets.