Clearwire slammed as CEO reportedly mulls default

November 18, 2011

(AP) -- Shares of wireless broadband network operator Clearwire Corp. plunged Friday after its chief executive told The Wall Street Journal that the company is weighing whether to make a large interest payment on Dec. 1.

Erik Prusch said that if the company misses the $237 million payment, it has a 30-day grace period to make it. As of Sept. 30, the company had $698 million in cash and short-term investments, and it had about $4 billion in net long-term debt.

"It's a very expensive payment that we have," Prusch said in an interview with the newspaper. "It would be a significant drain of our cash, so we have to evaluate everything in terms of our decision of where we're going."

Fears that the company will default and possibly try to reorganize through bankruptcy proceedings sent the shares spiraling. In such proceedings, shareholders are often left with nothing while creditors can be forced to forgive debt in exchange for ownership of the company.

Clearwire's stock fell 43 cents, or 23 percent, to $1.43 in late Friday trading.

Clearwire spokeswoman Susan Johnston said that the company "does not comment on speculation" and "remains focused on growing its wholesale and retail business, and raising additional funds."

Clearwire, which is based in Kirkland, Wash., is majority owned by wireless carrier Corp. Sprint is Clearwire's biggest customer and resells access to Clearwire's network as "Sprint 4G."

Sprint said last month that it had no plans to continue selling phones compatible with Clearwire's current network after 2012. It also detailed plans to set up its own fourth-generation, or 4G, data network.

Clearwire's network uses a technology that isn't compatible with the that the rest of the industry, including Sprint, is adopting. It wants to upgrade to the standard 4G technology, known as Long-Term Evolution, or LTE. But its finances are weak, and it would need additional funding to do so.

Moody's Investors Service last month slashed credit ratings on Clearwire deep into junk territory, saying it needs to find a partner other than Sprint if it is to avoid default in a couple of years. Moody's corporate family rating on Clearwire is "Caa2," just four notches above default and 17 away from the top "AAA."

Macquarie analyst Zach Horat said in a research note Friday that he thought a default was unlikely and that talks between Sprint and Clearwire "have entered a more cooperative phase."

He expects Sprint to inject $500 million to $600 million into Clearwire by the end of the year and enter into a long-term network hosting deal. He also said he expects MetroPCS Communications Inc. to become a new strategic partner for Clearwire. He has an "outperform" rating on the shares with a price target of $3.60.

Explore further: Sprint: No more Clearwire devices after 2012

0 shares

Related Stories

Sprint: No more Clearwire devices after 2012

October 7, 2011

(AP) -- Sprint Nextel Corp. said Friday that it will stop selling phones and other devices compatible with Clearwire Corp.'s network at the end of next year, as it switches customers to its own higher-speed, fourth-generation ...

Sprint down after testy meeting with analysts

October 8, 2011

(AP) -- The struggling wireless carrier Sprint Nextel Corp. said Friday that it will need to raise more money to build a higher-speed data network even as it must spend more to subsidize sales of the new iPhone to its customers.

Sprint posts smallest quarterly loss in 4 years

October 26, 2011

(AP) -- Sprint Nextel Corp. on Wednesday reported its smallest quarterly loss in four years, as it continued a turnaround and kept getting better at keeping and attracting customers.

Sprint Nextel posts first revenue gain in years

October 27, 2010

(AP) -- Sprint Nextel Corp. on Wednesday reported its first quarterly revenue increase in three years, as improvements in Sprint-branded and prepaid service offset the continued flight of subscribers from the Nextel network.

Recommended for you

'Droneboarding' takes off in Latvia

January 22, 2017

Skirted on all sides by snow-clad pine forests, Latvia's remote Lake Ninieris would be the perfect picture of winter tranquility—were it not for the huge drone buzzing like a swarm of angry bees as it zooms above the solid ...

Singapore 2G switchoff highlights digital divide

January 22, 2017

When Singapore pulls the plug on its 2G mobile phone network this year, thousands of people could be stuck without a signal—digital have-nots left behind by the relentless march of technology.

Making AI systems that see the world as humans do

January 19, 2017

A Northwestern University team developed a new computational model that performs at human levels on a standard intelligence test. This work is an important step toward making artificial intelligence systems that see and understand ...

Firms push hydrogen as top green energy source

January 18, 2017

Over a dozen leading European and Asian firms have teamed up to promote the use of hydrogen as a clean fuel and cut the production of harmful gasses that lead to global warming.

0 comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.