Activist investor Crest Financial has offered US$240m in debt financing to Clearwire so that the wireless wholesaler no longer has to rely on funding from US mobile operator Sprint Nextel.
The financing is part of Sprint’s US$2.2bn takeover offer,…
Activist investor Crest Financial has offered US$240m in debt financing to Clearwire so that the wireless wholesaler no longer has to rely on funding from US mobile operator Sprint Nextel.
The financing is part of Sprint’s US$2.2bn takeover offer, made in December, as it tries to acquire the remaining 50% of Clearwire it does not currently own.
Sprint pledged US$800m of financing to Clearwire in instalments of US$80m over a period of ten months.
Clearwire passed on the offer in January and February, but in March and April it drew on a total of US$160m, in the form of exchangeable notes, from Sprint.
Clearwire could still draw on a further US$480m.
Crest is offering Clearwire US$240m convertible notes. However Crest said that its notes would be exchangeable at US$2 per share, a premium of 33.3% on Sprint’s US$1.50 per share conversion rate. The notes would carry 1% interest per annum. If the merger offer with Sprint is rejected the notes will not become exchangeable until 2018.
Crest, which last disclosed that it owned 8.34% of Clearwire’s outstanding stock, said the financing would free the wireless provider to explore different options to Sprint’s “inadequate merger offer”.
Sprint’s US$2.97 per share offer is a point of contention for some Clearwire investors, who believe it undervalues the company.
Dish Network made a rival bid in January of US$3.30, but the offer is subject to numerous conditions. Dish also indicated it might withdraw its offer should Clearwire draw on financing provided by Sprint. But no announcement was made following Clearwire’s decision to do so in March and April.
In February Clearwire CFO Hope Cochran said on a conference call that the company would need vendor financing and the financing pledged by Sprint to meet its operating, financing and capital spending for this year. In a previous filing with the SEC Clearwire said it needed to draw on US$240m of the total financing offered by Sprint, or three months worth.
Crest said its offer would give Clearwire enough capital to build-out 2,000 LTE sites this year according to its business plan, and to repay its interest for 2013.
“The Crest financing would allow Clearwire to continue as an independent company and execute its multi-customer business plan that the Clearwire board’s own financial advisors, Evercore Group and Centerview Partners, concluded is the most profitable business strategy Clearwire could pursue,” Crest said.
“It would [also] give the Clearwire board the opportunity to pursue sales of excess spectrum, such as to Dish Network Corporation, to provide more liquidity to Clearwire.
“Crest believes that Dish made a real and actionable proposal to purchase a portion of Clearwire’s excess spectrum some time ago but, for reasons known only to Clearwire, Clearwire has failed to complete such sale.”
Sprint declined to comment on Crest’s offer. Clearwire said: “We have received the proposal from Crest Financial. Our Special Committee of the Board will evaluate the offer to determine what, if any, action to take.”
Evercore Partners is Clearwire’s financial adviser for the takeover offers, and Kirkland & Ellis is providing legal advice. Centerview Partners advises Clearwire’s special committee, with Simpson Thacher & Bartlett and Richards, Layton & Finger acting as counsel.
Citigroup is financial advisor to Sprint while Skadden, Arps, Slate, Meagher & Flom and King & Spalding are acting as counsels.
