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UPDATE 1-Clearwire debt funding may top $2 billion

* Prices $1.33 bln in debt, may raise another $760 mln

* Analysts say debt expensive but gives breathing room

* Clearwire shares up slightly after 13 pct drop Thurs

NEW YORK, Dec 3 (Reuters) - Wireless service provider Clearwire Corp CLWR.O has raised about $1.33 billion in debt and may be on track to raise another $760 million if its biggest shareholder Sprint Nextel S.N exercises an option to buy convertible bonds.

Clearwire is seeking to bridge a funding gap in order to stay operating as it seeks additional financing to complete constructing a high-speed wireless network to allow it to compete with bigger rival Verizon Wireless.

The amount Clearwire raised so far is slightly higher than the plan, announced on Thursday, to raise over $1.1 billion in debt. [ID:nN02190394] Sprint, which currently owns 54 percent of Clearwire shares, has about a month to decide if it wants to buy into $760 million of convertible debt Clearwire gave it rights to buy.

Sprint declined comment on whether it will buy into the debt or not.

Analysts said that while the debt is expensive it was a good sign that Clearwire was able to complete the financing. Now it needs to raise $3 billion or more of new funding if it is to finish building a high-speed wireless network it needs to compete with bigger rivals.

“I do think this is still just a first step. It happens to be an expensive first step but it gives them breathing room,” Mizuho analyst Michael Nelson said.

Clearwire said it priced an offer of $175 million senior secured notes due 2015 with an interest rate of 12 percent and an issue price of 105 percent, and $500 million of 12 percent secured notes due 2017 at a price of 100 percent.

Another analyst, David Novosel of Gimme Credit, said that even at high rates the debt was still a risky bet.

“There’s still considerable risk Clearwire does not have enough funding to complete the roll-out of its network,” Novosel said.

The company also priced an offer of $650 million 8.25 percent exchangeable notes due 2040 at an issue price of 100 percent.

It said that the initial exchange rate for the convertible notes is 141.2429 Clearwire shares per $1,000 of principal amount equivalent to an initial exchange price of approximately $7.08 per share.

It also granted Sprint Nextel the right to buy additional convertible notes so if Sprint exercises these rights it could result in Clearwire issuing up to $760 million in additional exchangeable notes.

Clearwire shares traded up 1 cent at $5.89 in morning trade on Nasdaq. The stock had closed down 13 percent the day before as investors were disappointed by the news it was offering debt rather than attracting equity investments.

Verizon Wireless, the top U.S. mobile company, is a venture of Verizon Communications Inc VZ.N and Vodafone Group Plc VOD.L. (Reporting by Sinead Carew; editing by Dave Zimmerman)

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