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Sprint Is Selling $1 Billion in Junk Bonds to Upgrade Its Network

February 20, 2018, 7:48 PM UTC

Sprint Corp. is selling junk bonds for the first time in three years as the fourth-largest U.S. mobile-phone company invests to upgrade its wireless network.

Sprint is selling $1 billion of unsecured junk bonds due 2026, according to a filing Tuesday from the Overland Park, Kansas-based company. The notes, which the company can’t buy back, are expected to be sold today, according to a person with knowledge of the matter, who asked not to be identified as the details are private.

The debt may yield around 7.75 percent, according to the person. The deal put pressure on Sprint’s existing bonds, which were among the worst performers in the Bloomberg Barclays High Yield Index on Tuesday with the company’s 6.875 percent notes due 2028 dropping 2 cents on the dollar to 97.9 cents as of 12:59 p.m. in New York, according to Trace bond price data.

The bond sale marks Sprint’s first trip to the high yield market in three years nearly to the day. Chief Financial Officer Michel Combes said on a Feb. 2 earnings call that the company would look to issue its second round of spectrum-backed bonds “in the next coming weeks” or to tap other markets, such as high-yield debt. Tuesday’s notes are ranked senior unsecured.

‘Balanced Approach’

“Sprint returning to the high-yield bond market is a strong sign and also positive in that it’s a more balanced approach to the market,” said Mark Stodden, an analyst at Moody’s Investors Service who rates the company B2, five steps below investment grade. “It’s wise for Sprint to preserve its secured capacity for a rainy day, when the market conditions aren’t as favorable as they are today.”

The collapse of merger talks with T-Mobile late last year left Sprint alone to face a competitive wireless market. Sprint, majority owned by Masayoshi Son’s SoftBank Group, lags behind rivals Verizon Communications Inc., AT&T Inc., and T-Mobile US Inc. in terms of subscribers.

Now it is building a next-generation network known as “5G” that will be faster than the current 4G offering. The company hopes to lift prices as a result, Chief Executive Officer Marcelo Claure said earlier this month. Its turnaround effort has made progress with a 10th consecutive quarter of customer gains in the three months that ended in December.

JPMorgan Chase & Co. and Goldman Sachs Group Inc. are managing the bond sale, according to the filing.