Clearwire looks to raise $1.1B+ in debt offering

Just a day after Verizon Wireless (VZ) announced plans to begin offering its LTE-based mobile data services on Dec. 5, rival Clearwire Corp. (CLWR) said it plans to raise more than $1.1 billion through a debt offering to cover its current financial shortfall.
Clearwire, which is in the process of finishing up its plans to cover 120 million potential customers with its WiMAX network by the end of this year, said its debt offering will include $175 million in first-priority senior secured notes due 2015; $500 million of second-priority secured notes due 2017; and $500 million of exchangeable notes due 2040. The carrier also said it will grant the initial purchasers of the exchangeable notes an option to purchase up to an additional $100 million of exchangeable notes.
Clearwire also noted that depending on what its current shareholders decide, it could issue up to an additional $584.6 million in exchangeable notes. Clearwire said it intends to use the net proceeds from the offering for working capital and for general corporate purposes, including capital expenditures.
A Clearwire spokesman said the company will “continue to pursue potential equity investments from our significant investors, potential equity investments from new investors and a potential sale of excess spectrum.”
Clearwire announced cost cutting measures last month as it grappled with options to raise additional funds for its current operations as well as plans to expand its build out plans beyond the 120 million pop mark. Analysts have noted that the carrier could need as much as $2 billion to fund its 2011 growth plans.
Clearwire noted that as part of its funding plans it was looking at potentially selling off some of its vast spectrum assets, with a report noting the carrier was in talks with T-Mobile USA Inc. for either a possible spectrum sale or network tie up.
Another source of capital is Sprint Nextel Corp. (S), which owns more than 55% of Clearwire and relies on the company for its WiMAX-based “4G” service. Sprint Nextel has said it would be willing to fund Clearwire’s build out plans, but that possibility is being held up by Clearwire’s ownership structure that includes a number of other investors.
Clearwire’s stock was down more than 6% in early Thursday trading on fears of stock price dilution, while Sprint Nextel’s stock was trading up nearly 5% as investors saw the move as lessening Sprint Nextel’s exposure to Clearwire’s funding needs.
Clearwire recently pushed past the 100 million covered pops mark with the launch of its branded “Clear” service in Los Angeles; Miami; Cincinnati, Cleveland and Columbus, Ohio, and said it will launch service in the San Francisco Bay Area on Dec. 28.
Verizon Wireless said it plans to cover more than 110 million pops with its LTE network beginning Dec. 5, with plans to expand that coverage to more than 285 million pops by the end of 2013.
Sprint Nextel nominates board replacements
In addition to its funding plans, Clearwire also reported that Sprint Nextel has nominated a trio of new board members to Clearwire’s board. The new members would replace the three Sprint Nextel members, including CEO Dan Hesse, who left the board in September.
The nominated members include William Blessing, Mufit Cinali and Hossein Eslambolchi. Blessing is currently a consultant to Burns & McDonnell and had previously served in a management position at Embarq Corp.; Cinali is currently a managing director with Springwell Capital Partners L.L.C.; while Eslambolchi is currently a technical advisor to Ericsson Corp. and the University of California School of Engineering.
Clearwire’s current board is scheduled to vote on the new nominees on Dec. 10.