DEAL: Sprint’s wireless spectrum-backed bonds

Author: Amélie Labbé | Published: 2 Nov 2016
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Sprint's first-of-a-kind wireless spectrum-backed bonds saw the US company taking the unusual step of using its core asset as the collateral.

The wireless carrier's  $3.5 billion securitisation is part of a wider $7 billion programme devised so that it can tap capital markets more cheaply, something it has not been able to do so far because of its poor borrowing history and shrinking market share.

The portfolio of spectrum capacity it put up as collateral is worth an estimated $16.4 billion, and its use in a securitisation helped Sprint secure a BBB rating from Fitch and Baa2 from Moody’s. It comprises a number of the company’s FCC spectrum licences in addition to third party leased licence agreements – all of these had so far been unencumbered assets.

"Sprint is running out of funding options"

Sprint has previously carried out similar securitisations of cell towers, handsets and accounts receivable, as have other telcos including Verizon and AT&T. But the fact it resorted to using its core asset is unusual. But doing so was key to the deal, according to Valerie Potenza, head of high yield research at XtractResearch.

“Sprint has had a number of other debt agreements in place but it raised secured debt in this instance without using any existing secured debt capacity,” she said. “Restrictions on previous debt issuances had so far prevented it from doing so.”

Under the terms of the deal, Sprint will lease its portfolio of spectrum capacity from three special purpose vehicles (SPVs) created specifically to manage the offering in return for monthly so called hell-or-high-water lease payments of $165 million, for a duration of 30 years. These payments will be transferred to individual noteholders.


  • Sprint recently closed a $3.5 billion securitisation, backed by its wireless spectrum licences;
  • The company managed to issue investment-rated debt because of the securitisation of its spectrum assets even though it carries a junk rating;
  • The securitisation was carried out via three newly-formed SPVs which will lease the spectrum back to Sprint in exchange for monthly payments for a duration of 30 years;
  • The proceeds of the deal will partly be used to pay down existing debt, which has spiralled to $33 billion;
  • The US telco has borrowed extensively in the past few years, because of shrinking revenue and profit – this has contributed to increasingly unmanageable borrowing costs.

The offer attracted offers worth $30 billion. The five-year notes have a coupon of 3.36%, which Potenza said was lower than coupon on straight debt.

The wireless spectrum portfolio used as collateral is worth over $16 billion
Sprint’s previous forays into capital markets – which became more numerous in recent years due to shrinking revenues - have led to it selling unsecured debt with yields as high as 13.5%.

Both these facts are put forward as an argument to explain the company’s increasingly precarious financial position, and the fact it is running out of funding options. It is expected it will use the proceeds of this securitisation for general corporate purposes including to pay down debt.

It is estimated that Kansas-headquartered Sprint, in combination with its various subsidiaries, has debts totalling $33 billion.

According to a note from Greg Kabance, managing director of structured finance at Fitch Ratings, Sprint's upcoming debt maturities are substantial and create a more pressing need to close the ongoing operating deficit.

“The proposed wireless spectrum backed notes financing is a critical piece to begin addressing Sprint’s maturity wall in fiscal years 2016 and 2017,” he said.

  • Sprint and various of its indirect wholly-owned subsidiaries transferred a portfolio of wireless spectrum licences to newly-formed special purpose vehicles (SPVs), which then issued securitisation notes for a total value of $3.5 billion;
  • The SPVs will then lease the wireless spectrum back to Sprint in return for monthly payments;
  • These payments will used to pay back noteholders/creditors.

  • Sprint used its own wireless spectrum capacity as the asset in the securitisation;
  • Estimates put the value of this spectrum at around $16.4 billion, which helped Sprint gain an investment-grade rating from various rating agencies.


The wireless spectrum licences used in the securitisation were transferred to wholly-owned subsidiaries of Sprint. The financing was collateralised by a pledge of the equity of the (Sprint and some of its wholly-owned subsidiaries) and of the licence-holding entities as well as certain transaction accounts.

  • Sprint through three newly-created SPVs issued $3.5 billion in series 2016-1 class A notes in three tranches jointly and severally as co-issuers out of a $7 billion programme;

  • Class A-1 notes will have an expected maturity of five years, class A-2 notes will have an expected maturity of seven years, and class A-3 notes will have an expected maturity of 10 years;

  • SCI's payment obligations under this lease will be guaranteed on a senior unsecured basis by Sprint and all of SCI's subsidiaries that guarantee its revolving credit facility.


 Sprint set up three bankruptcy remote entities (the SPVs) to house and manage the wireless spectrum assets.

Tear sheet

Sprint’s $3.5 billion securitisation closed on October 27 2016. Goldman Sachs Group, Mizuho Securities USA and J.P. Morgan Securities acted underwriters on the deal.

Legal advisers on the deal are unknown at this time. 

See also

DEAL: Zopa's consumer loans securitisation 

DEAL: A first for Mexican securitisation 

IFLR1000’s weekly deal roundup can be found here.