Clearwire Might Skip on Upcoming Debt Payment - The UpStream

Clearwire Might Skip on Upcoming Debt Payment

posted Sunday Nov 27, 2011 by Nicholas DiMeo

Clearwire Might Skip on Upcoming Debt Payment

Clearwire has been in a little bit of financial trouble as of late. Aside from Sprint deciding that they would be moving to LTE in the future of their 4G deployment, leaving Clear behind after 2012. This week, we're adding more fuel to the fire, as Clearwire is thinking about not paying a huge debt that is due in about two weeks.

In September, the company had $698 million in cash and short-term investments, so it should be able to afford to pay the $237 million it owes on December 1st. The problem is that the company has to raise a lot more money in order to stay in business in a year's time.

Chief Executive Erik Prusch spoke on the matter in a recent interview.

It's a very expensive payment that we have. It would be a significant drain of our cash, so we have to evaluate everything in terms of our decision of where we're going.

The (slightly) good news is that Clearwire will have a grace period of 30 days after their bill is due in order to pay it and right now the company is working on making more deals and getting more funding in order to come up with the money. Sources have reported that they are also looking to restructure their debt with a new financial company.

The downside is that Sprint owns 54% of Clearwire and while they helped financially, they do not necessarily control the day-to-day operations. The potential end of the company could cause a premature disruption to Sprint's 4G support by Clear, which should go through until the end of 2012 if Clear stays in business. Sprint has already raised $4 billion this year and has informed investors that it will use some of the cash to support Clearwire and its network, however the Sprint board has been in discussion on whether continuing support for Clearwire would be worth it in the long run.

The end result could actually have Sprint buying Clearwire outright if the company does not make its payment in a couple of days. This move would keep Sprint's 4G spectrum, but would ironically add another $4 billion in debt, which would bring the total to $20 billion in long-term borrowings and the like.

It's only a few short days until payment is due and we should be move information by the end of the year on the future of Clearwire.

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