Sprint signs $1.2 billion deal for the sale and lease-back of certain leased devices to newly formed Mobile Leasing Solutions, LLC
Creates a repeatable structure to sell future leased devices
Strong combination of financial and strategic parties support the transaction
Company also amends existing Receivables Facility to include lease receivables and expands total capacity to $4.3 billion
OVERLAND PARK, Kan. (BUSINESS WIRE), November 20, 2015 - Sprint Corporation (NYSE:S) signed a deal with newly formed Mobile Leasing Solutions, LLC for the sale and lease-back of certain leased devices which is expected to provide the company with approximately $1.1 billion in cash proceeds at closing. The cash proceeds are part of approximately $1.2 billion in total consideration that are expected to be exchanged for approximately $1.3 billion of leased device assets. The transaction, which is expected to close in the first week of December, will immediately improve the company’s liquidity position and the funding comes at an attractive cost of capital, which is well below Sprint’s alternatives in the high-yield debt market. The transaction also establishes a repeatable structure for mitigating the working capital impacts associated with leasing devices to Sprint’s customers.
“Sprint and SoftBank have worked together to create a unique structure that advances a very high percentage of the total value of certain devices leased to our customers, including the device residual values,” said Sprint CFO Tarek Robbiati. “Providing mobile devices to customers is the biggest use of cash in the carrier model and with this new structure we have more closely aligned Sprint’s cash flows with those associated with leasing devices to our customers.”
Mobile Leasing Solutions, LLC was formed by a group of equity investors including SoftBank and has secured debt financing from several lenders including international banks and leasing companies. Brightstar Corp. through its Financial Services Business provided support in structuring the transaction, including assisting in the formation of Mobile Leasing Solutions, LLC which is utilizing Brightstar's Lease Management and Tracking System. Brightstar has also been contracted to provide reverse logistics and device remarketing services, which will include a forward purchase agreement that is being finalized with Foxconn, thus minimizing the downside risk of future changes in device residual values.
Receivables Facility Amendment Provides Additional Liquidity
Sprint amended its existing Receivables Facility to include the sale of future lease receivables, thus increasing the maximum funding limit by $1 billion to a total of $4.3 billion. These lease receivables are related to devices not included in the aforementioned transaction with Mobility Leasing Solutions, LLC.
Updated Financial Outlook
The company’s previous expectation for fiscal year 2015 Adjusted EBITDA was $7.2 to $7.6 billion. Based solely on the inclusion of transformation program costs and the sale and lease-back of certain leased devices to Mobile Leasing Solutions, LLC, which is accretive to free cash flow, the company now expects fiscal year 2015 Adjusted EBITDA* to be between $6.8 to $7.1 billion.
Conference Call and Webcast
Sprint management will host a conference call at 11:00 a.m. ET today to discuss additional details of the transaction.
Please plan on gaining access 10 minutes before the start of the call.
A simultaneous webcast will be available at www.sprint.com/investors. Please note that questions may only be submitted through the conference call option. Replays of the conference call will be available shortly afterward by calling 800-585-8367 and entering the code: 83614827.
This release includes “forward-looking statements” within the meaning of the securities laws. The words “may,” “could,” “should,” “estimate,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “target,” “plan,” “providing guidance,” and similar expressions are intended to identify information that is not historical in nature. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to the LeaseCo transaction and statements expressing general views about future operating results — are forward-looking statements. Forward-looking statements are estimates and projections reflecting management’s judgment based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. With respect to these forward-looking statements, management has made assumptions regarding, among other things, ability to recognize the expected benefits of the LeaseCo transaction; availability of devices; availability of various financings, including any additional leasing transactions; and the timing of various events. Sprint believes these forward-looking statements are reasonable; however, you should not place undue reliance on forward-looking statements, which are based on current expectations and speak only as of the date when made. Sprint undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our company's historical experience and our present expectations or projections. Factors that might cause such differences include, but are not limited to, those discussed in Sprint Corporation’s Annual Report on Form 10-K for the fiscal year ended March 31, 2015. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.
Sprint (NYSE: S) is a communications services company that creates more and better ways to connect its customers to the things they care about most. Sprint served more than 58.6 million connections as of September 30, 2015 and is widely recognized for developing, engineering and deploying innovative technologies, including the first wireless 4G service from a national carrier in the United States; leading no-contract brands including Virgin Mobile USA, Boost Mobile, and Assurance Wireless; instant national and international push-to-talk capabilities; and a global Tier 1 Internet backbone. Sprint has been named to the Dow Jones Sustainability Index (DJSI) North America for the past five years. You can learn more and visit Sprint at www.sprint.com or www.facebook.com/sprint and www.twitter.com/sprint.