Telecom & Wireless

Clearwire Has To Raise More Capital (CLWR, S, INTC, VZ)

Jon C. Ogg

Clearwire Corporation (NASDAQ: CLWR) needs more capital.  The company has just announced that its Clearwire Communications LLC operating subsidiary plans to raise over $1.1 billion in new capital.  Clearwire noted that it intends to use the net proceeds received for working capital and for general corporate purposes, which of course includes cap-ex.  Sprint Nextel Corporation (NYSE: S) is its 4G partner and Intel Corporation (NASDAQ: INTC) was listed as owning roughly 15% of the company back on September 30, 2010.   The company is about to get more 4G competition in the coming days from Verizon Communications (NYSE: VZ) to boot.

The sale of securities will be through the offering of debt securities in private placement transactions under rule 144A, meaning these will be unregistered.   The press release shows the following maturities:

  • $175.0 million first-priority senior secured notes due 2015;
  • $500.0 million of second-priority secured notes due 2017;
  • and $500.0 million of exchangeable notes due 2040.

The company will also grant the initial purchasers of the exchangeable notes an option to purchase up to an additional $100.0 million of exchangeable notes.  Seeing the year 2040 is a rather surprising feat with a 30-year commitment if the notes are not exchanged.

It noted, “Upon exchange, Clearwire Communications may deliver either shares of Class A Common Stock of Clearwire Corporation or cash. Certain stockholders of Clearwire Corporation that hold equity securities representing approximately 85% of Clearwire Corporation’s voting power have pre-emptive rights for 30 days from the date of the offering memorandum for the exchangeable notes that entitle such stockholders to purchase their pro rata share (based upon voting power) of all exchangeable notes issued.”

The company has received waivers from stockholders holding approximately 31% of the voting power. The remaining pre-emptive rights, if exercised, could result in Clearwire Communications issuing up to an additional approximately $584.6 million in exchangeable notes.

Further, the company is not aware of whether or not all or any of these rights will be exercised. The first lien notes will be issued under the indenture dated November 24, 2009 governing Clearwire Communications’ existing $1.85 billion of secured notes issued in November 2009.

In a separate announcement, Clearwire noted that Sprint Nextel Corporation (NYSE: S) has nominated 3 directors for election to the Clearwire Corporation board of directors: William R. Blessing, Mufit Cinali and Hossein Eslambolchi.

Clearwire shares are currently halted after closing at $6.82 on Wednesday and the 52-week trading range is $5.70 to $8.82.

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