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Sprint Closes on $2.1 Billion of Financing with Three New Vendor Financing Agreements and Existing Loan Expansion


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http://newsroom.sprint.com/news-releases/sprint-closes-on-21-billion-of-financing-with-three-new-vendor-financing-agreements-and-existing-loan-expansion.htm

 

 


OVERLAND PARK, Kan. (BUSINESS WIRE), January 07, 2015 - Sprint Corporation (NYSE: S) announced today that it has signed three new vendor financing facilities totaling $1.8 billion to purchase 2.5 GHz network equipment and related services from key suppliers. Sprint also amended and expanded by $300 million its credit relationship with Export Development Canada (EDC) as well as amended the terms of its existing secured equipment credit facility.

“These deals provide Sprint with greater flexibility and liquidity options as we focus on growing the business and investing in our network,” said Joe Euteneuer, Sprint’s Chief Financial Officer.

The three new vendor financing agreements are:

  • A secured facility for up to $800 million from Nokia Networks maturing in June 2021. It is backed by credit insurance provided by Finnvera plc, the export credit agency of Finland.
  • A secured facility for up to $750 million from Samsung maturing in Dec. 2022. It is backed by credit insurance provided by the Korea Trade Insurance Corporation (Ksure), the export credit agency of Korea.
  • A secured facility for up to $250 million from ALU maturing in Dec. 2021. It is backed by credit insurance provided by Delcredere | Ducroire (D/D), the export credit agency of Belgium.

Each of these three new facilities is guaranteed by both Sprint Corporation and Sprint Communications, Inc., and the respective equipment purchases will serve as collateral. Interest will be variable, consisting of 6-month LIBOR plus a spread, depending on the particular facility.

In addition, ALU was also instrumental in arranging a $300 million incremental facility from EDC, maturing in Dec. 2019. This facility was extended through an amendment of the existing EDC facility, which was also amended to align its financial covenants with Sprint’s revolving credit facility and add Sprint Corporation as a guarantor. The total outstanding borrowings from EDC now amount to $800 million.

Sprint also amended the terms of the secured equipment credit facility that it used to finance $1 billion in purchases of network equipment and related services from Ericsson. The amendment of this facility aligned its financial covenants with those of Sprint’s revolving credit facility, and added Sprint Corporation as a guarantor. As of Sept. 30, 2014, this facility had an outstanding principal balance of $635 million after accounting for prior repayments, which will continue semi-annually until March 2017.

Finally, last month the Federal Communications Commission (FCC) approved Sprint’s request to reduce the Letter of Credit (LOC) for 800 MHz incumbent reconfiguration costs by an additional $22.6 million. This lowered the LOC to approximately $434 million and follows the FCC’s approval of a reduction from $850 million to $457 million earlier in 2014.

As of Sept. 30 2014, Sprint’s total cash, cash equivalents, and short-term investments were $5.3 billion and its total liquidity position was $8.8 billion.

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Could someone please explain exactly what this means??? Cheaper phones? More tower upgrades?? Faster deployment??

 

It says in the Press Release that most of the money is going on the 2.5 build out.

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It says in the Press Release that most of the money is going on the 2.5 build out.

This cash is the grease for that squeaky wheel, eh?

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I don't see how cause

 

As of Sept. 30 2014, Sprint’s total cash, cash equivalents, and short-term investments were $5.3 billion and its total liquidity position was $8.8 billion.

 

I think the answer to your question is Sprint's management would rather not eat into their liquidity position and would rather take on vendor financing to pay for it in the mean-time.

 

EDIT - The liquidity is nice to have when you're entering into a price war.

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I think the answer to your question is Sprint's management would rather not eat into their liquidity position and would rather take on vendor financing to pay for it in the mean-time.

 

EDIT - The liquidity is nice to have when you're entering into a price war.

What liquidity? Sprint has been negative FCF every quarter for some time now. And the operating cash reserves dipped into the red late last year.

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What liquidity? Sprint has been negative FCF every quarter for some time now. And the operating cash reserves dipped into the red late last year.

 

FCF can help liquidity but it isn't the definition of liquidity. Sprint has cash and short-term investments on hand of 8.8 billion as of Sept 30th. They've been eating into that as you highlight but it is still liquid assets they can draw upon. This highlights the exact reason they want that cash as a backstop and would rather use vendor financing.

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Their liquidity is Softbank.

 

I don't see Softbank injecting cash any time soon. They have stated they WOULD if need be but are not immediately planning on it. Sprint is in a decent position to weather the current storm with the cash on hand and this deal which was just announced.

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I would think SoftBank would want to see return at some point, right?  I know they have a really long term vision, but Masa Son is constrained to the same capital markets requirements here as everyone else.  

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I would think SoftBank would want to see return at some point, right?  I know they have a really long term vision, but Masa Son is constrained to the same capital markets requirements here as everyone else.  

Ali Baba!

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Does this help get the equipment any faster or deploy it faster? Or is there still the issue with the companies not making the equipment fast enough?

I think the limiting factor at this point is the availability of labor, not equipment manufacturing or money, especially in Samsung markets. Extra money could, however, play a role in recruiting more contractors to work for Sprint rather than another carrier.

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Does this help get the equipment any faster or deploy it faster? Or is there still the issue with the companies not making the equipment fast enough?

I would interpret this to mean either one of several things, or possibly even a combination of them...

 

1. Increasing scope of 2.5 than originally planned

2. Funding projections for capex are not being met from cash flow and now need to borrow

3. OEM's are caught up and now can even increase equipment deliveries if Sprint wants to move up delivery dates and pay sooner than forecasted

4. Cost overruns on 2.5 upgrades causing a need for more money required

5. Sprint has the ability to borrow from vendors at decent terms so use the cash you were going to burn on 2.5 somewhere else it's desperately needed

 

There is not enough info released for us to know why they are doing it and what benefits, if any, it will bring to customers. Because it may just be leveraging debt to keep free cash flow and do only things they were already planning. Or it could be a further expansion in scope. Not known.

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So does this mean the Note 4 or 5 will be able to use simultaneous voice and data?

 

Sent from my SM-N910P

 

Why would this news suddenly imply simultaneous voice and data? :blink:.  By the way, the Note 4 was already released in 2014.

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Why would this news suddenly imply simultaneous voice and data? :blink:. By the way, the Note 4 was already released in 2014.

Since the note 4 thread is just below this thread on Tapatalk, I think he meant this post to go in that thread.
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