Moody's cuts Sprint Nextel

Moody's Investors Service said it downgraded the corporate family rating of Sprint Nextel Corp. to B1 from Ba3.

The agency also said it downgraded its probability of default rating to B1 from Ba3, speculative-grade liquidity rating to SGL-4 from SGL-1, senior unsecured notes to B2, (LGD 5, 75%) from B1 (LGD 5, 77%) and senior unsecured guaranteed bank credit facility to Ba1 (LGD2, 12%) from Baa3 (LGD 2, 10%).

The agency also said it downgraded Sprint Capital Corp.'s backed senior unsecured notes to B2 (LGD 5, 75%) from B1 (LGD 5, 77%) and backed senior unsecured medium-term notes rating to provisional B2 from provisional B1.

Moody's also said it downgraded Nextel Communications Inc.'s senior unsecured notes to B1 (LGD 3, 42%) from Ba3 (LGD 3, 42%), along with iPCS Inc.'s senior secured first-priority notes to B1 (LGD 4, 50%) from Ba3 (LGD 3, 48%) and senior secured second-priority notes to B3 (LGD 5, 78%) from B1 (LGD 5, 77%).

The downgrade reflects Sprint's decision to invest heavily in its own 4G network assets and likely phase out its failed partnership with Clearwire, Moody's said.

This capital intensive strategic decision, combined with Sprint's introduction of the iPhone, will strain liquidity and push leverage to about 5x before the benefits of the investment begin to accrue, the agency said.

Moody's said that Sprint's introduction of the iPhone will result in better growth, lower churn and generate meaningful long-term benefits for Sprint.

But, the timing of the iPhone launch, coincident with a doubling of capital expenditure in 2012, will pressure liquidity and force Sprint to raise more capital.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.