Sprint sells debt at historic coupon, seeks to cut interest expenses

By Devika Patel

Knoxville, Tenn., Oct 25 – Sprint Corp. said its latest issue of $3.5 billion of spectrum-backed senior secured notes is part of the company’s strategy to diversify its sources of financing, lower its cost of capital and reduce future interest expenses by retiring upcoming higher-coupon maturities, resulting in the company becoming cash-flow positive on a pre-tax basis.

“Last week, we priced $3.5 billion of spectrum-backed senior secured notes,” chief financial officer Tarek Robbiati said on the company’s second quarter earnings conference call on Tuesday.

“This unique and innovative transaction represents the latest example of the company’s strategy to diversify its sources of financing in order to lower the company’s cost of capital and future rate expense.

“We are very pleased to say that these notes priced at 3.36%, which is less than half of our current effective interest rates and is materially less than the coupon on the next maturities coming due.

“The demand for these notes was strong and the book was oversubscribed.”

Robbiati also noted that the company’s $2.5 billion unsecured credit facility will terminate in connection with the notes sale.

“What you’re seeing now is our ability to raise debt at historically low levels for Sprint,” chief executive officer Marcelo Claure added on the call.

“We were very surprised by the tremendous demand that we had for these notes.

“Our strategy has been to diversify our sources of funding. Moving forward, our intention is to bring down the interest expense as quickly as possible so that we can get to a point where we are pre-tax positive,” Claure added.

Highlights

The company ended the quarter with total liquidity of $11.3 billion, comprised of $5.7 billion of cash, cash equivalents and short-term investments.

Sprint has $3 billion of ongoing borrowing capacity under its revolving bank credit facility, $2.5 billion of undrawn capacity under its unsecured financing facility and approximately $100 million of undrawn capacity under its receivables facility at the end of the quarter.

Notes

On Oct. 20, Sprint priced $3.5 billion of 3.36% senior secured notes (expected ratings Baa2//BBB) at 99.99834 to yield 3.375% on Thursday.

The deal was launched earlier in the session with a 3.375% yield and a target price of par.

The notes have an anticipated repayment date of Sept. 20, 2021, a legal final maturity date of March 20, 2023 and are secured by broadband spectrum leases.

Goldman Sachs & Co. was the global coordinator and left lead bookrunner. J.P. Morgan Securities LLC and Mizuho Securities were the joint lead bookrunners for the deal, which is expected to settle on Oct. 27.

Sprint is an Overland Park, Kan.-based wireless telecommunications services and internet carrier holding company.

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