Sprint's Credit Rating Cut by S&P Amid ‘Intense Competition’

  • Ratings company reduces Sprint debt one level to B rating
  • Moody's downgraded the wireless carrier's debt in September

Sprint Corp.’s credit rating was cut by Standard & Poor’s on steep competition and slower growth in the wireless industry, a further setback as the carrier seeks to regain its financial footing.

The ratings company reduced Sprint’s already junk-rated debt one level to B, according to a statement Tuesday. While S&P said Sprint has made improvements in areas like subscriber gains and described its rating outlook as stable, the company faces “intense competition and mature market conditions in the U.S. wireless industry,” according to the statement.

On Sept. 15, Moody’s Investors Service downgraded the carrier to B3, a level that means high credit risk.

Last week, Sprint reported a 12 percent increase in cash and equivalents to $2.2 billion at the end of the fiscal third quarter, which ended Dec. 31. Still, it was down by almost half from a year earlier. The company, which is 83 percent owned by SoftBank Group Corp. in Tokyo, has $2.3 billion in debt to either repay or refinance this year and almost $12 billion over the next five years.

Shares fell 9.8 percent to $2.77 on Tuesday. The stock is down 23 percent so far this year. Sprint’s $4.2 billion of 7.875 percent bonds that mature in September of 2023 lost 2.75 cents on the dollar to 68.5 cents to yield 14.93 percent at 5:04 p.m. Tuesday in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. 

Stocks and bonds of the fourth-largest U.S. wireless carrier hit multiyear lows last month after Morgan Stanley credit analyst David Hamburger wrote a note questioning the company’s turnaround path.

The company has no clear path to a turnaround that could lead to realizing the full value of its bonds or to recover that value in a restructuring or bankruptcy, Hamburger said at the time.

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