By Sinead Carew
April 9 Hedge fund Aurelius Capital Management
LP on Tuesday offered $80 million in financing to wireless
service provider Clearwire Corp as an alternative to
convertible financing proposed by majority shareholder Sprint
Nextel, which is trying to buy the rest of Clearwire.
The move by Aurelius, which typically invests in distressed
debt, is the latest twist surrounding Sprint's controversial
proposal to buy the roughly 49 percent of Clearwire it does not
own. Shareholders have complained about Sprint's offer.
It follows an offer last week from Clearwire minority
shareholder Crest Financial Ltd for $240 million in debt
financing that would also be an alternative to what Sprint has
Clearwire confirmed it received the offer from Aurelius and
said its board's special committee would "evaluate the offer to
determine what, if any, action to take."
Bellevue, Washington-based Clearwire, which has said it only
has funding until year-end with help from Sprint, has been
seeking financing to upgrade its network and to support
Clearwire in January had received a preliminary counter-bid
from satellite service provider Dish Network for $3.30
DA Davidson analyst Donna Jaegers said the latest proposal
gives Clearwire more choice for near-term funding, but it does
not solve any long-term problems.
"I think (Aurelius) puts the pressure on Clearwire to look
at some of the alternative funding, since it seems to be better
terms than Sprint's funding," Jaegers said.
Jaegers said that Clearwire would still need Sprint to buy
the company unless it receives a firm counter-offer for its
spectrum or signs up new wholesale wireless customers besides
Sprint, which rents space on Clearwire's network and is its
In a letter to Clearwire's board, Aurelius said on Tuesday
that its notes would be exchangeable for Clearwire stock at $2
per share. ()
Clearwire has taken $160 million in financing from Sprint
so far this year in the form of notes that would be
convertible to Clearwire stock at $1.50 per share.
It could take another $480 million of financing from Sprint
in monthly installments of $80 million under the terms of their
agreement. Clearwire had declined the Sprint funding in January
and February because it was reviewing the Dish offer, which
involved a condition that it avoid taking the Sprint financing.
Aurelius suggested that Clearwire could avoid taking more of
the financing available from Sprint by combining its financing
with the Crest financing and potentially find another $160
million from other investors.
Crest is among a group of Clearwire shareholders that have
complained about Sprint's offer price of $2.97 per share, which
would need approval from a majority of Clearwire shareholders.
The Sprint debt offering has also been controversial because
since Sprint can convert Clearwire debt into equity it would
reduce the clout of Clearwire's existing minority holdings.
Clearwire's shares have risen well above Sprint's offer
price as many investors have bet that it will be forced to
sweeten its bid. Clearwire shares closed down a penny at $3.26
on Tuesday on Nasdaq.
Aurelius urged Clearwire to accept its proposal within two
weeks so the companies would have time to complete their
paperwork before May, the next time Clearwire could draw on
Aurelius is known as an uncompromising hedge fund that
involves itself in high-profile distressed debt cases. It was a
major player in Tribune Co's protracted bankruptcy as lenders
and junior creditors fought for four years before the newspaper
and broadcasting company emerged from Chapter 11.
The fund has also taken on countries; Aurelius sued
Argentina for $1.3 billion in payments on defaulted bonds.