Sprint spectrum plan could push total raised to $7 billion backed by 1.9 GHz and 2.5 GHz spectrum holdings valued at $16.4 billion
Sprint continued its unique funding measures, announcing plans to raise $3.5 billion in debt backed by 14% of its total spectrum holdings on a megahertz-per-potential customer covered basis.
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 notes themselves are being offered in three series of various maturities, with Sprint noting the program structure allows for up to $7 billion to be raised backed by spectrum holdings. The carrier added that the spectrum holdings are valued at approximately $16.4 billion based on a third-party evaluation looking at “various assumptions and limitations” as of June 30, 2017.
Sprint said it expects the notes to be rated investment grade by both Moody’s and Fitch rating services, with a close on the process by early next month.
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 Sprint’s device leasing program in which the carrier 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.
In its last quarterly results the carrier posted just $376 million in capital expenses, which came in well below recently lowered estimates, though Sprint continues to claim it will spend around $3 billion for the full year on capex. CEO Marcelo Claure reiterated that the carrier is being very careful with capex in a move to garner a better return for shareholders, adding the carrier had over the past several years been a significant investor in capex, which has allowed it to begin cutting back while not impacting network performance.
Investors appeared supportive of the move, with the carrier’s stock (S) surging as much as 3% in early Wednesday trading. Sprint’s stock was trading at roughly half of its current value as recently as late May, and nearly kissed $2 per share in January.
Perhaps more importantly for Claure, the stock price continued its march toward the $8 per share mark, which is said to trigger a significant bonus structure for the executive.
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