Feb. 27 (Bloomberg) -- Sprint Nextel Corp., the third-largest U.S. wireless operator, said it plans to sell $2 billion in notes to help pay for refinancing, network upgrades and possible funding for its wireless partner Clearwire Corp.
Sprint will sell notes due in 2017 and 2020 through a private placement, according to a statement today. The sale, to be completed March 1, includes five-year notes at 9.13 percent and eight-year debt, which will be guaranteed by Sprint units, at 7 percent, the Overland Park, Kansas-based company said later in a separate statement included in a regulatory filing.
Sprint raised $4 billion through a debt offering in November to help with network spending and financing for Clearwire. The return trip to capital markets shows Sprint is raising cash to cover the growing costs of upgrading its wireless network to higher-speed technology and selling mobile devices that require subsidies, such as Apple Inc.’s iPhone. Sprint, which has lost money for the last five years, is struggling to compete against larger rivals AT&T Inc. and Verizon Wireless.
The move comes after Sprint’s board voted down a possible acquisition of the smaller MetroPCS Communications Inc., a person familiar with the plan said last week. The board decided the stock and cash transaction, which may have cost as much as $8 billion including debt, would have been too expensive given the current level of Sprint’s stock price.
Sprint rose 3.2 percent to $2.55 at the close in New York. The stock has dropped 41 percent in the past 12 months.
The carrier has a four-year $15.5 billion commitment to pay Apple for the iPhone and in its annual report filed today, Sprint says it has $29.5 billion in additional payment commitments though 2017.
Sprint is graded B1 with a “negative” outlook by Moody’s Investors Service and an equivalent B+, also with a “negative” outlook by Standard & Poor’s, according to data compiled by Bloomberg.
The last time Sprint sold eight-year notes was in August 2009, when it issued $1.3 billion of 8.375 percent securities due in August 2017, Bloomberg data show. The debt was assigned a Ba2 from Moody’s at the time.
Today’s eight-year debt is expected to have a Ba3 grade and BB- from S&P, said the person with knowledge of the offering. The five-year debt, which is not guaranteed, is expected to be rated B3 by Moody’s and B+ by S&P, the person said.
The securities due August 2017 traded at 98.3 cents on the dollar to yield 8.78 percent as of 1:01 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.