Clearwire has received an offer to be taken over by Sprint, but in the meantime, may default on interest payments.
The Internet services provider is "actively considering" defaulting on an interest payment due at the beginning of June, according to Reuters. A proxy filing filed on Friday says that the interest payment, worth $255 million, is based on roughly $4.5 billion of outstanding debt.
"If the merger is not completed, we may be forced to explore all available alternatives, including financial restructuring, which could include seeking protection under the provisions of the United States Bankruptcy Code," The filing warns. "In addition, our board of directors is actively considering whether to not make the June 1, 2013, interest payment on our approximately $4.5 billion of outstanding debt."
With so much debt hanging over the firm, it is unsurprising that Clearwire has warned its investors that it will face serious restructuring -- and potentially bankruptcy -- unless the company accepts a takeover bid by Sprint Nextel. Sprint, the broadband provider's largest shareholder, has offered $2.97 a share -- $2.2 billion -- to acquire full ownership of Clearwire and the remaining 52 percent of shares it does not already own.
This bid did little to enamour other shareholders, who would have to agree to the takeover. In a surprise move, Dish Networks swooped in with a "superior" offer of $3.30 a share, but Clearwire's contractual obligations make it difficult to accept a third-party bid. As a result, the largest minority shareholder in Clearwire, Crest Financial, has offered to lend the broadband provider $240 million. Although this would do little to clear the company's debt, the shareholder said the move is designed to give Clearwire another option, and the funds would be enough to fund the building of 2,000 LTE sites as well as pay interest on debts for the remainder of the year.
If Clearwire accepts Sprint's offer, then the company will be granted $800 million in financing. The Washington-based firm has been attempting to build LTE networks to both retain customers and attract new ones, but Clearwire's financial situation makes staying competitive difficult.
In addition to the filing's disclosure, Clearwire also said it has received a bid from an anonymous "strategic buyer" that wishes to purchase spectrum leases for $1 billion to $1.5 billion, but no more details were disclosed.