Sprint to Raise $3.5 Billion on Sale-Leaseback of Airwaves

  • U.S. carrier says deal involves about 14% of its airwaves
  • CFO said in March up to $5 billion could be raised on spectrum

Sprint Corp., the unprofitable wireless carrier controlled by SoftBank Group Corp., is using airwaves as collateral to borrow as much as $3.5 billion to fund its business.

The arrangement involves a portion of Sprint’s 2.5-gigahertz and 1.9-GHz spectrum valued at $16.4 billion, according to a statement Wednesday from the Overland Park, Kansas-based company.

Chief Financial Officer Tarek Robbiati had said in March that the company aimed to raise $3 billion to $5 billion against its spectrum rights. Sprint in April raised $2.2 billion in a sale and leaseback deal of network equipment, and in November the company entered a similar deal involving some of its mobile phone inventory to raise $1.1 billion.

Using spectrum as collateral is a rare move, which suggests Sprint may be running out of short-term options in an unfavorable high-yield bond market. It has to make $2.3 billion in debt payments this year, a warmup for $10 billion coming due by the end of 2020.

To buy time for its turnaround effort and the potential M&A possibilities under a new White House administration, SoftBank Chairman Masayoshi Son has been hunting for assets he can borrow against -- and spectrum may be the one asset more important than the phones themselves.

Spectrum War Chest

Sprint owns the largest piece of high-frequency, 2.5-GHz spectrum in the U.S. It’s been promising for years that with enough infrastructure behind them, the airwaves could create America’s fastest wireless network.

The spectrum Sprint is mortgaging is being used in about 77 percent of all of Sprint’s 2.5 GHz enabled sites and 33 percent of Sprint’s 1.9 GHz enabled sites. The portfolio, which represents 14 percent of the carrier’s total airwaves holdings, will be leased back to the carrier under a long-term agreement, according to the statement.

Sprint is transferring the airwaves to a wholly owned special purpose vehicle that will issue the notes in a private placement. The company expects the notes to be rated investment grade by both Moody’s and Fitch.

Sprint’s most actively traded debt, $4.25 billion of 7.875 percent bonds due 2023, rose 0.8 percent to 101.56 cents on the dollar to yield 7.58 percent at 10:10 a.m. in New York, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority.

Shares of Sprint rose as much as 3.4 percent to $7.01, their highest price in a month, and were trading at $6.94 at 10:15 a.m. Through Tuesday, the stock is up 87 percent this year.

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