Sprint launches $3.5 billion five-year notes at par target price to yield 3.375%; pricing midday

By Paul A. Harris

Portland, Ore., Oct. 20 – Sprint launched its $3.5 billion offering of class A-1 five-year senior secured notes (expected ratings Baa2//BBB) with a tight-to-talk 3.375% yield and is targeting a par issue price, according to market sources.

The official talk, which was circulated on Wednesday, was in the 3.5% area, plus or minus 12.5 basis points, well tight to the initial guidance in the 4% area.

The deal is expected to price midday on Thursday.

There is $30 billion-plus of demand for the bonds from more than 400 accounts, sources say.

Some investment-grade players have backed away from the deal because the notes are not expected to be listed in the investment-grade index for reasons including the “asset-backed-style” structure, and the expectation that the deal is not going to be rated by S&P Global Ratings, a trader said.

However high-yield accounts are all over the deal, traders say. One of those traders said that some accounts are liable to get zero allocations.

Overall allocations are expected to shake out at 10% to 20% of order amounts, a portfolio manager said on Thursday morning.

Although the deal is being priced off of a $7 billion shelf, the size is not expected to grow, a trader said.

Earlier in the week Sprint consolidated the securitization deal into a single tranche, withdrawing previously planned tranches of class A-2 seven-year notes and class A-3 10-year notes.

Timing was accelerated, as a previous schedule had the roadshow running through the entire week.

Goldman Sachs & Co. is the global coordinator and left lead bookrunner for the deal, which is coming in a joint effort on the part of the high-yield, investment-grade and structured products syndicate desks. Mizuho Securities and J.P. Morgan Securities LLC are the joint lead bookrunners.

The Rule 144A and Regulation S for life notes feature four years of call protection, a three-year weighted average life, interest-only payments for one year (amortizing at 25% annually thereafter) and final maturity of March 2021.

The notes are secured by broadband spectrum leases.

The Overland Park, Kan.-based wireless telecommunications services and internet carrier holding company plans to use the proceeds for general corporate purposes, which may include retirement of debt and network densification and optimization.

The issuing entities are Sprint Spectrum Co. LLC, Sprint Spectrum Co. II LLC and Sprint Spectrum Co. III LLC.

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