The debt ratings agency, Fitch says that the Outlook for Sprint Nextel remains Negative reflecting Fitch's concerns over the uncertainty and execution risks associated with Sprint Nextel improving its core operations, including the company's competitive position despite an increasingly challenging environment.
As of March 31, 2007, Sprint Nextel had approximately US$22 billion of debt outstanding.
Longer term, Fitch believes the company faces significant technology and execution risk surrounding the migration of its iDEN subscriber base to CDMA and the implementation of its WiMAX strategy. The WiMAX deployment will require several billion dollars of investment as well as the incurrence of significant start-up operating losses, which could become a material drain on the company's financial resources particularly if the company underperforms expectations. While Sprint Nextel has made progress on its aggressive action plans and Fitch expects the company to improve its operating performance throughout the remainder of 2007, the extent of the improvement is still uncertain.
Sprint Nextel's liquidity position is sufficient given its cash position, free cash flow and available draw under its credit facility. Cash at the end of the first quarter of 2007 was $2.4 billion.
During the first quarter, Sprint Nextel repurchased $300 million of its common stock, bringing the total stock repurchased to $1.9 billion of the $6 billion program. Fitch expects Sprint Nextel to use a balanced approach for share repurchases in the remainder of 2007, using cash and free cash flow generated from operations to fund the buyback. Sprint Nextel has a $6 billion senior unsecured revolving credit facility with a $2.5 billion letter of credit under the facility. In addition, the company had approximately $399 million of commercial paper outstanding at the end of the first quarter. Fitch continues to expect leverage of approximately 2 times or less by the end of 2007.
Fitch Ratings says that it has assigned a 'BBB' rating to Sprint Nextel's US$750 million floating-rate note offering. The proceeds from the offering are expected to be used for general corporate purposes including the refinancing of $475 million of Nextel Partners debt due in 2011."
Posted to the site on 21st June 2007
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