Capital Markets

Sprint Revamps Credit Deal

The total the company can borrow is lower, but access to it is easier.
Stephen TaubNovember 7, 2008

Sprint Nextel Corp. has amended the terms of its nearly three-year-old credit agreement, agreeing to a lower borrowing ceiling, a higher interest rate, and new restrictions in exchange for easier access to the revolving facility.

Under the amended agreement, the credit facility maxes out at $4.5 billion, down from $6 billion. The interest rate was hiked from LIBOR plus a margin of 0.75 percent to LIBOR plus a margin of between 2.50 percent and 3 percent depending on the company’s debt ratings. There are also new restrictions on payments the company is allowed to make, including cash dividends, unless certain conditions are met.

To get those concessions, Sprint’s lenders agreed to let the company increase the ratio of total indebtedness to the trailing-four-quarter EBITD required to tap the facility from a maximum of 3.5-to-1 to 4.25-to-1. So, while the total amount the company can borrow is lower, funds will be more accessible.

Sprint, the third-largest wireless company, said it paid down $1 billion of the outstanding loan amount.

The $4.5 billion will remain available until final maturity in 2010. Up to $3 billion may be used to secure letters of credit.

The company also amended its $750 million credit agreement with Export Development Canada, originally entered into in March 2007, to incorporate the same covenant changes.