-- Clearwire Corp. announced it has received a proposal by
satellite-TV provider DISH Network Corp. (BB-/Positive/--) to purchase about 24%
of Clearwire's spectrum for $2.2 billion.
-- DISH will also try to acquire at least a quarter of Clearwire's common
stock for $3.30 per share with certain governance rights.
-- Ratings for Clearwire and majority-owner Sprint Nextel Corp. remain on
CreditWatch with positive implications.
On Jan. 10, 2013, Standard & Poor's Ratings Services said that its the 'CCC'
corporate credit rating and all other ratings on Bellevue, Wash.-based
wireless carrier Clearwire Corp. remain on CreditWatch with positive
implications. The ratings were placed on CreditWatch on Dec. 13, 2012.
In addition, our 'B+' corporate credit rating and all other ratings on
Overland Park, Kan.-based wireless carrier Sprint Nextel Corp. remain on
CreditWatch with positive implications. The ratings were placed on CreditWatch
on Oct. 11, 2012.
We placed our ratings on Clearwire on CreditWatch with positive after Sprint
Nextel signed an agreement to acquire the remaining 49% stake in Clearwire
that it did not already own for about $2.1 billion plus the assumption of debt.
We placed our ratings on Sprint Nextel on CreditWatch following the
announcement that it was in talks to sell all or part of the company to
Japan-based SoftBank Corp. Subsequently, on Oct. 15, 2012, Sprint Nextel
announced its signed agreement to sell a 70% stake in the company to SoftBank
for about $20.1 billion, which would include an $8 billion cash infusion.
Today's CreditWatch updates follow the announcement that Clearwire received a
proposal by satellite-TV provider DISH to purchase about 24% of Clearwire's
spectrum for $2.2 billion. It will also try to acquire at least a quarter of
Clearwire's common stock for $3.30 per share with certain governance rights.
Additionally, the two companies would enter into a commercial agreement that
would enable DISH to use Clearwire to help build and operate a network, and
DISH would provide Clearwire with financing to fund its own network build and
near-term operating losses. The Clearwire spectrum would cover approximately
11.4 billion MHz-POPs. The bid for Clearwire's equity is higher than the $2.97
per share price that Sprint agreed to with Clearwire to acquire the remaining
stake in Clearwire that it did not already own.
While the ultimate outcome of the proposed transaction is difficult to
determine, we believe that there are significant hurdles for DISH to overcome
in its bid for Clearwire. Under the current merger agreement with Sprint
Nextel to buy the remaining stake in Clearwire that it does not already own,
Clearwire is prohibited from selling spectrum assets without Sprint Nextel's
consent. The equity holders' agreement further places constraints on a
spectrum sale. Also under the equity holders' agreement, Sprint Nextel can
block a change of control since that would require consent from 75% of the
Still, Clearwire's board has a fiduciary duty to evaluate the DISH proposal
since the offered equity price is at a premium to what was offered by Sprint
Nextel to public Clearwire shareholders.
Standard & Poor's will continue to monitor discussions between Sprint Nextel
and Clearwire regarding the acquisition offer as well as the proposed offer by
DISH for Clearwire. We could raise or affirm the ratings on Clearwire if an
acquisition by either Sprint Nextel or DISH is ultimately completed.
It is our view that Sprint Nextel's acquisition of the portion of Clearwire
that it does not already own would most likely be linked to consummation of
SoftBank's pending purchase of Sprint Nextel. Accordingly, in the event that
Sprint Nextel acquires full ownership of Clearwire, we will first assess the
stand-alone credit profile of the combined company. Key factors will be the
impact of the additional spectrum on Sprint Nextel's business risk profile as
well as the higher leverage for the combined company. We believe that the
stand-alone credit profile for a combined Sprint Nextel and Clearwire would be
lower than Sprint Nextel's current stand-alone credit profile. Next, we would
evaluate imputation of credit support from SoftBank depending on our view of
the strategic relationship between SoftBank and Sprint Nextel. If, however,
Sprint Nextel is not successful in its proposed acquisition of Clearwire, we
would evaluate Sprint Nextel's stand-alone credit profile and impute some
degree of support from SoftBank.
Related Criteria And Research
-- Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012
-- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011
-- Use Of CreditWatch And Outlooks, Sept. 14, 2009
-- Criteria Guidelines For Recovery Ratings, Aug. 10, 2009
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
-- 2008 Corporate Criteria: Rating Each Issue, April 15, 2008
-- 2008 Corporate Criteria: Ratios And Adjustments, April 15, 2008
Temporary contact number: Allyn Arden (917-882-2541)
Ratings Affirmed; Recovery Ratings Unchanged
Corporate Credit Rating CCC/Watch Pos/--
Clearwire Communications LLC
Clearwire Finance Inc.
Senior Secured 1st-Lien CCC/Watch Pos
Recovery Rating 4
Senior Secured 2nd-Lien CC/Watch Pos
Recovery Rating 6