Blog Coverage Sprint Announces a $3.5 Billion Sale

LONDON, UK / ACCESSWIRE / October 13 2016 / Active Wall St. blog coverage looks at the headline from Sprint Corp. (NYSE: S) as the company is using airwaves as collateral to borrow as much as $3.5 billion to fund its business. The company, majority owned by Japan’s SoftBank Group said on October 12th, 2016 that it planned to raise an initial $3.5 billion by mortgaging about 14% of its wireless airwaves. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.

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The Agreement

Sprint announced that three wholly owned special purpose subsidiaries have commenced an offer of up to $3.5 billion of wireless spectrum-backed notes in three series with varying maturities in a private transaction. The Issuers’ directly owned subsidiaries will acquire a portfolio of FCC licenses and a small number of third-party leased license agreements from subsidiaries of Sprint, which comprise a portion of Sprint’s 2.5GHz and 1.9GHz spectrum holdings, representing approximately 14% of Sprint’s total spectrum holdings on a MHz-pops basis.

The Spectrum Portfolio is currently utilized by approximately 77% of all of Sprint’s 2.5GHz enabled sites and approximately 33% of Sprint’s 1.9GHz enabled sites. The Spectrum Portfolio will be leased back to Sprint Communications Inc. pursuant to a long-term lease agreement, the rental payments for which are sufficient to service the Notes. Based on an independent third-party valuation, the central value of the Spectrum Portfolio as of June 30, 2017, based on the various assumptions and limitations set forth in the valuation report, is approximately $16.4 billion. The company expects the notes to be rated investment grade by both Moody’s and Fitch.

The Notes are being issued pursuant to a $7 billion program established for this structure, consisting of the initial issuance and potentially future issuances, subject to certain conditions. No. 4 U.S. wireless carrier expects the offering to be close in early November 2016.

Why Use Spectrum?

Utilizing spectrum as collateral is an unusual move, which can be a result of lack of short-term options in the bond market. The company needs to make debt payment of $2.3 billion in 2016, while payment of $10 billion is due by the end of 2020. The company had negative cash flow of $3.17 billion for the financial year ended on March 31, 2016.

In March, 2016, Sprint’s CFO, Tarek Robbiati, stated that the company intended to raise $3 billion to $5 billion against its spectrum rights. On April 06th, 2016, Sprint entered into a transaction with several bankruptcy remote entities for the sale and leaseback of certain existing network assets for $2.2 billion of funding. On April 29th, 2016, Sprint signed its second deal with Mobile Leasing Solutions, LLC (MLS) for the sale and lease-back of certain leased devices for approximately $1.1 billion in cash proceeds. In a separate transaction, the company signed an 18-month bridge financing facility arranged by Mizuho Bank, LTD, providing $2 billion of additional liquidity. Sprint owns the largest share of high-frequency, 2.5-GHz spectrum in the U.S.

To Launch Software-Defined Wide Area Network (SD-WAN) services

In a separate press release on October 12th, 2016, Sprint announced plans to launch SD-WAN services that will enable enterprises to more efficiently manage corporate networks, optimize performance, and design business policies that improve the customer experience.

Sprint is teaming with VeloCloud, a leader in SD-WAN solutions, to support customer trials for the SD-WAN service during 4Q 2016, with a global launch planned for early 2017.

“After a thorough vendor evaluation process, Sprint determined that the VeloCloud solution best aligned with Sprint’s focus on network agility, flexibility and cloud services enablement”, said Mike Fitz, Vice President of the Sprint Global Wireline Business Unit.

Stock Performance

On Wednesday, the stock closed the trading session at $6.78, flat from its previous closing price. A total volume of 22.38 million shares have exchanged hands, which was higher than the 3-month average volume of 21.57 million shares. Sprint’s stock price rallied 35.35% in the last three months, 93.71% in the past six months, and 54.44% in the previous twelve months. The company’s shares surged 87.29% since the beginning of the year. The stock currently has a market cap of $27.19 billion.

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