Aurelius Capital to Clearwire Corporation: Enough is Enough
Aurelius Capital Management, LP yesterday wrote the Board of Directors of Clearwire Corporation (NASDAQ: CLWR) to insist that the special meeting of stockholders, to consider the proposed merger with Sprint, proceed on June 13, 2013 as presently scheduled. Clearwire has twice adjourned that meeting, from its original date of May 21, 2013.
The text of the letter appears below:
Aurelius Capital Management, LP
535 Madison Avenue
New York, New York 10022
Tel.: +1 (646) 445-6500
Mark D. Brodsky, Chairman
Tel.: +1 (646) 445-6510
June 6, 2013
BY FEDERAL EXPRESS AND EMAIL
The Board of Directors of Clearwire Corporation
c/o Broady R. Hodder, General Counsel
1475 120th Avenue NE
Bellevue, WA 98005
Re: No More Adjournments
Ladies and Gentlemen:
We write on behalf of various fund entities we manage that are substantial holders of Clearwire Class A common stock.
In April, many months after the Sprint merger agreement was entered into, Clearwire’s shareholders were finally afforded an opportunity to vote on it. The shareholder meeting originally scheduled for May 21 has now been twice adjourned, plainly because shareholders have voted to reject the deal (as was to be expected from the outset). The shareholder meeting is now set for June 13.
We write to insist that you not further adjourn the shareholder meeting.
Whatever the vote, the shareholder meeting should be held and completed on June 13.1
Your compliance with this demand is both right and important. Among other things:
- The shareholders have spoken. It would make a mockery of the requirement of shareholder consent to adjourn again just because the shareholders have not given Sprint the answer it wants.
The sooner the shareholders’ rejection of the merger is formalized,
the sooner Clearwire can operate and finance its business free of
the merger agreement’s onerous restrictions. For example:
- The merger agreement prohibits Clearwire from utilizing any financing other than Sprint’s exchangeable note financing. Every time Clearwire draws upon that financing, Sprint buys more notes exchangeable for Clearwire stock at $1.50 per share. With Clearwire stock trading around $4.30 per share, and even Sprint’s woefully inadequate merger price being $3.40 per share, selling stock to Sprint at $1.50 does not pass the straight-face test. Clearwire has already received demonstrably superior financing proposals from Crest Financial Limited ($240MM) and ourselves ($80MM). DISH recently offered Clearwire $560 of financing at an even higher conversion price. These financing proposals arrived unsolicited and despite Clearwire making every effort to “play dead” rather than follow a normal process for raising capital. No doubt many other financing options would be found now if Clearwire were free to pursue them.
- The merger agreement restricts Clearwire’s ability to generate liquidity by selling spectrum. Since the merger agreement was signed, Verizon and DISH have each made unsolicited bids for material amounts of Clearwire spectrum. The Verizon and DISH bids would provide Clearwire with substantial amounts of cash, even before taking into account any improvement in price Clearwire could achieve through negotiation. Here again, if Clearwire is seeing this kind of interest on an unsolicited basis, at a time when the merger agreement ties Clearwire’s hands, surely more and better outcomes can be achieved if Clearwire is freed of the merger agreement.2
In sum, enough is enough. No more adjournments. It is time (indeed, past time) for Clearwire to honor the shareholder vote and put an end to the burdens of the merger agreement.
Very truly yours,
Mark D. Brodsky
cc: Dennis Prieto – Aurelius Capital Management (email@example.com)
Larry Robbins, Esq. – Robbins Russell (firstname.lastname@example.org)
Stephen Jenkins, Esq. – Ashby & Geddes (SJenkins@ashby-geddes.com)
1 While this letter focuses exclusively on this point, no inference should be drawn from our silence here concerning any other act or omission heretofore or hereafter committed by you or others.
2 While the Equityholders’ Agreement (the “EHA”) also purports to permit Sprint to restrict certain financings and spectrum sales, (i) Sprint’s rights under the EHA are much less restrictive than the covenants in the merger agreement, and (ii) any attempt by Sprint to use the EHA to limit Clearwire’s actions would be subject to Sprint’s fiduciary duties as the majority and controlling shareholder of Clearwire.
for Aurelius Capital Management:
Brian Schaffer, 212-279-3115, ext. 229