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Sprint Raises $2.2 Billion Fund Under Complex Transaction Structure

April 8
8:44 AM 2016

Sprint Corp., the Kansas based major global internet carrier has announced on Wednesday raising $2.2 billion through selling and leasing-back certain network assets. The fund will be used for repayment of matured debt while continuing its turnaround efforts.

The American telecommunication holding company has agreed selling network gear worth around $3 billion to a new entity, Network LeaseCo, backed by Sprint's parent company SoftBank Group Corp. Network LeaseCo will pay $2.2 billion for the equipment and immediately lease the gear back to the internet carrier. Sprint will repay the fund in less than two years and the deal is expected get closed next week, reports The Wall Street Journal.

SoftBank owns 83% stake in Sprint which has reported holding $6 billion liquidity during the end of 2015. The wireless service provider is scheduled either to repay or refinance this year and around $12 billion during the next five years. Analysts presume, more such deals may take place, according to a report published in Bloomberg.

Sprint's total liabilities have been estimated at $59.22 billion and cash or cash equivalent at $2.18 billion as of December 31. The internet carrier has set up two leasing vehicles for funding handset leasing and network investments in a bid to omit those cost from the balance sheet. Meanwhile, Sprint investors have expressed concern over burning cash at an alarming rate, reports Reuters.

The announced deal is one of many possible ways Sprint may use to remain solvent for more than two years. Meanwhile the wireless carrier will emphasize on stabilizing the company while trying to return to growth, cites Philip Cusick, a telecom analyst at JP Morgan in a research note.

Sprint has failed to record annual profit since 2006 and suffers from acute cash crunch in funding operations. The network giant has been offering wireless service at half the price of rivals for the last couple of months.

carrier has planned for cutting $2.5 billion cost by the end of this year. The savings are expected to help the debt burdened enterprise to repay installment scheduled get matured in December.

The new lenders will enjoy effective higher standing compared to the existing bondholders if the carries approaches for filing bankruptcy. The network assets involved in the transaction will be kept on Sprint's book. This particular deal-feature will allow the company to continue to take advantage of accounting benefits from depreciating assets.

 
Sprint has reported a total debt of $59.22 billion with repayment schedule in December. Despite adopting cost cutting measures, the debt burdened company has been reported to consider many ways to remain solvent. Finally, the wireless giant has reached a deal to raise $2.2 billion fund as part of its efforts to turnaround.

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