Clearwire said Thursday that it will raise more than $1.1 billion in a series of private debt transactions.
The move eases Clearwire's cash crunch for now (statement). When Clearwire last reported earnings, the company said it was going into cash conservation mode by putting off marketing and laying off workers. Its costly buildout of 4G WiMax service meant the company was pinched for cash. At the time, Clearwire also said it would be looking for additional funding.
Clearwire is raising money via additional debt. It is floating $175 million in first priority senior secured notes due 2015. First priority means you get paid first in the event of a bankruptcy. In addition, Clearwire is offering $500 million of second priority secured notes due 2017 and another $500 million due 2040. There's an option for another $100 million in notes for initial purchases.
As of Sept. 28, Clearwire had more than $2.8 billion in long-term debt. The new notes will put Clearwire's long-term debt just south of $4 billion.
These bonds can be exchanged for shares or stock. These offerings have multiple moving parts, but the bottom line is that Clearwire now has more working capital and that's good news for Sprint. Sprint relies on Clearwire for its 4G service and owns a nice chunk of the company.
Separately, Clearwire said Sprint has nominated William R. Blessing, Mufit Cinali and Hossein Eslambolchi for three open seats on its board. Blessing is a consultant to Burns & McDonnell and an expert on smart grids and telecommunications. Cinali is a managing director at Springwell Capital Partners. He's also a vet of GE Capital, AT&T and Bain. Eslambolchi is a technical advisor to Ericsson and held numerous high-profile positions such as CIO and CTO at AT&T.