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Sprint Lenders Waive Leverage Test to Avoid Covenant Violation

Sept. 16 (Bloomberg) -- Sprint Corp. lenders agreed to waive a quarterly leverage test until Dec. 31, following the third-largest U.S. mobile phone carrier’s debt sale this month that threatened to trigger a loan default.

Sprint, which also obtained similar agreements for its revolving credit facility and a Canadian loan, has now received all “necessary waivers” from lenders, the Overland Park, Kansas-based company said in a statement today. Its $6.5 billion bond sale would have breached the terms of its loans “by a significant level” at the end of the month, according to a Sept. 4 regulatory filing.

The company had about $1.9 billion of borrowings outstanding linked to the loans on June 30, including $913 million letters of credit under the revolver, when its debt was 4.2 times earnings before interest, taxes, depreciation and amortization, according to an Aug. 5 regulatory filing. Terms of the loan prohibit the leverage ratio from exceeding 6.25 times.

Sprint completed the biggest junk-bond offering since 2008 with its sale at lower relative yields than it paid a year ago after an investment from Softbank Corp., a company three times the size of the U.S. unit. Sprint investors approved the $21.6 billion deal in June, giving Tokyo-based Softbank control of the carrier.

Sprint issued $4.25 billion of 7.875 percent, 10-year bonds that paid 498 basis points, or 4.98 percentage points, more than similar-maturity Treasuries and $2.25 billion of 7.25 percent securities due in 2021 at 466 basis points over benchmarks, according to data compiled by Bloomberg. Both spreads are narrower than a year ago, when the carrier paid 568 basis points more than Treasuries to borrow $1.5 billion for eight years.

The notes due in 2023 were quoted at 103.8 cents on the dollar today to yield 7.33 percent, Bloomberg prices show.

To contact the reporter on this story: Matt Robinson in New York at Mrobinson55@bloomberg.net.

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net.

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