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Sprint Nextel And Clearwire Ratings On Watch Following Dish Bid for Clearwire

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Standard & Poor's Ratings Services said that the 'B ' corporate credit rating and all other ratings on Sprint Nextel remain on CreditWatch with positive implications. The ratings were placed on CreditWatch on Oct. 11, 2012.

Additionally, S&P's  'CCC' corporate credit rating and all other ratings on Clearwire remain on CreditWatch with positive implications.

The CreditWatch listing on Sprint Nextel followed the announcement that it was in talks to sell all or part of the company to Japan's SoftBank. Subsequently, on Oct. 15, 2012, Sprint Nextel announced its signed agreement to sell a 70% stake in the company to SoftBank for about $20.1 billion, which would include an $8 billion cash infusion.

S&P also placed Clearwire on CreditWatch with positive implications after Sprint Nextel signed an agreement to acquire the remaining 49% stake in Clearwire that it did not already own for about $2.1 billion plus the assumption of debt.

­The latest CreditWatch update follows the announcement that Clearwire received a proposal by satellite-TV provider Dish to purchase about 24% of Clearwire's spectrum for $2.2 billion. It will also try to acquire at least a quarter of Clearwire's common stock for $3.30 per share with certain governance rights. Additionally, the two companies would enter into a commercial agreement that would enable Dish to use Clearwire to help build and operate a network, and Dish would provide Clearwire with financing to fund its own network build and near-term operating losses. The Clearwire spectrum would cover approximately 11.4 billion MHz-POPs. The bid for Clearwire's equity is higher than the $2.97 per share price that Sprint agreed to with Clearwire to acquire the remaining stake in Clearwire that it did not already own.

While the ultimate outcome of the proposed transaction is difficult to determine, S&P said that it believes that there are significant hurdles for Dish to overcome in its bid for Clearwire. Under the current merger agreement with Sprint Nextel to buy the remaining stake in Clearwire that it does not already own, Clearwire is prohibited from selling spectrum assets without Sprint Nextel's consent. The equity holders' agreement further places constraints on a spectrum sale. Also under the equity holders' agreement, Sprint Nextel can block a change of control since that would require consent from 75% of the outstanding shareholders.

Still, Clearwire's board has a fiduciary duty to evaluate the Dish proposal since the offered equity price is at a premium to what was offered by Sprint Nextel to public Clearwire shareholders.

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Tags: clearwire  dish network  sprint nextel  USA