By Charles Mead and Matt Robinson – Sep 6, 2013
The bond market is helping to make Sprint Corp. (S)’s promises to its bank lenders irrelevant.
The third-largest U.S. wireless carrier, backed by new majority owner Softbank Corp. (9984), said in a regulatory filing yesterday its $6.5 billion bond sale on Sept. 4 was enough to violate the terms of its loans “by a significant level” at the end of the month. While Sprint is in talks with lenders to amend the leverage covenant, the company also said it has the money to pay off its loans and cancel $4.5 billion of credit facilities if it fails to reach an agreement.
Sprint’s willingness to sacrifice its borrowing capacity including a $3 billion unsecured revolving credit line arranged by Citigroup Inc. and JPMorgan Chase & Co. underscores the security provided by Softbank, a company with a $78 billion market value, three times the size of the U.S. unit. That enabled Sprint to complete the biggest junk-bond offering since 2008 at lower relative yields than it paid a year ago and also increases the chance it will get the covenant amendment, according to KDP Investment Advisors Inc….