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Sprint to raise about $1.1 bn in cash through sale and lease-back deal

21 November 2015

Sprint Corp said it planned to raise about $1.1 billion in cash through a sale and lease-back deal with a company whose backers included Japan's SoftBank Group.

With the deal, the telecom company cut its full-year adjusted EBITDA forecast to $6.8 billion-$7.1 billion from $7.2 billion-$7.6 billion.

The company now projects an operating loss of $50 million-$250 million for the year, as against a profit of $200 million-$500 million forecast earlier, according to CFO Tarek Robbiati comments on a conference call.

Sprint's shares slumped as much as 6.2 per cent to $3.80 in late morning trading yesterday.

The lease-back deal was aimed at cutting costs due to a switch to new financing plans for phones that allowed monthly payments from traditional two-year contracts.

The new plans had been delaying money coming into the company for phone payments and had led to a cash crunch as the company needed to make upfront payments to phone makers.

"It was critical that they get the deal done ... but it is smaller than investors would have hoped for," said Craig Moffett, an analyst at MoffettNathanson LLC, Reuters reported.

The Overland Park-based wireless company has signed the deal with a new company part financed by Sprint's parent company Tokyo-based SoftBank Group Corp.

Mobile Leasing Solutions LLC, the provider of the cash, stood ready to do similar deals with Sprint in the future, Sprint's chief financial officer Tarek Robbiati said.

''We believe we can easily replicate this,'' Robbiati said during a conference call with Wall Street analysts.

According to Robbiati, he expected smaller but similar deals between Sprint and Mobile Leasing Solutions perhaps on a quarterly basis.

He added the funding cost to Sprint was attractive and likely to become cheaper in future deals.

Jennifer Fritzsche an analyst at Wells Fargo Securities has given the deal a tentative thumbs up.

''While we need to hear more details on the call (with analysts), we view the release of this information as a positive as this was a clear 'wait and see' moment for Sprint,'' Fritzsche wrote in a note to clients before Robbiati's conference call, according to a report by Bloomberg.

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