The move allows Sprint to generate $3.5 billion in funding, with another $3.5 billion possible; garners investment-grade ratings from agencies
Sprint moved on its plans to raise $3.5 billion in funding through the initial offering of debt backed by a portion of its spectrum holdings.
The carrier reported three of its wholly owned subsidiaries issued the debt as 3.36% senior secured notes, with quarterly amortization payments set to begin on Dec. 20, 2017, and an anticipate repayment date of Sept. 20, 2021. The offering is said to be at a substantial discount to upcoming debt payments in excess of 8%, backed by ratings in the “mid-BBB” range.
The funding was part of a move announced earlier this month by the carrier to tap into a portion of its spectrum holdings in order to raise much-needed capital. The initial offer is backed by 14% of the carrier’s total spectrum holdings on a megahertz-per-potential customer covered basis, with a total reported value of $16.4 billion “based on the various assumptions and limitations set forth in the valuation report.”
The carrier said the wireless spectrum being offered up includes slices of its 1.9 GHz and 2.5 GHz holdings and is being used by approximately 77% of its 2.5 GHz sites and 33% of its 1.9 GHz sites. The move calls for those assets to be leased back to the carrier as part of a “long-term” lease agreement with rental payments “sufficient to service the notes.”
The spectrum-backed move was expected and followed up on a pair of previous asset-related funding moves by the carrier.
Sprint late last year created its Mobile Leasing Solutions subsidiary, tasked with handling the financial aspects of the carrier’s device leasing program in which it provides devices to consumers for a monthly fee over a fixed term before exchanging that device for a new model. The carrier noted earlier this year it had raised more than $3 billion in liquidity through the MLS program.
Sprint in April moved on setting up its Network LeaseCo, which raised funds backed by the carrier’s infrastructure. The entity, which was set up in connection with parent company SoftBank, used $3 billion worth of equipment to raise $2.2 billion in funds.
Sprint said those transactions boosted its overall financial position by more than $5 billion. The carrier has been on a crusade to slash spending as it looks to cut corporate debt.
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