Sprint secures $1 billion loan commitment

Sprint has negotiated a $1 billion term loan facility with Citibank and Deutsch Bank to improve its financial flexibility, address concerns among analysts regarding its liquidity.

The agreement calls for a nine-month loan secured by the assets of Sprint’s directory publishing business. According to the company, the loan amount is equivalent to Sprint’s net new cash requirements for all of 2002, and the loan commitment is fully incremental to Sprint’s existing $5 billion revolving line of credit.

“You can look at this deal as pre-sale financing,” said Cary Robinson, senior research analyst for U.S. Bancorp Piper Jaffray. “I’m sure they don’t want to sell the directory business, but when you’re in a recession, you sometimes have to do things that are dire. And right now, Sprint is in a liquidity crunch.”

Robinson believes Sprint will take its time in shopping the directory business and could reap as much as $2 billion should they eventually unload it. However, it might not come to that.

“The market is coming back. [Federal Reserve Board Chairman Alan] Greenspan said it last week, and maybe all the market needed was for the big guy to send a signal,” he said. “So we might be out of the recession before they get it sold.”

In addition, Sprint said it is expanding its existing accounts receivable financing program to include Sprint PCS receivables, and expects the expansion will be in excess of $500 million, which should be available in the next 60 days. Sprint also said it had retained two investment firms to explore the value of its directory publishing business should it decide to sell it.

The company said it would reduce overall capital spending for 2002 by $400 million to $6.4 billion. As a result, Sprint FON is expected be free cash flow positive for full year 2002. Finally, due to “a significant delay or termination of the availability of the NextWave spectrum,” Sprint said the 2002 financing needs for its PCS group would be $300 less than previous guidance.