The fourth biggest wireless carrier in America has just revealed a couple of new funding deals that should improve its financial liquidity. Indeed, the two new deals that Sprint has inked should be able to funnel a further $3.1 billion in funding into the company. Considering the financial struggles that the mobile service network provider has been going through in the last few months, the deals could not be more perfectly timed.
Sprint had signed a deal with Mobile Leasing Solutions for the second time, for the sale and lease back of specific leased devices. The deal was facilitated by Mizuho Securities, an investment and banking services institution based in Japan, and a subsidiary of the Mizuho Financial Group. The deal should be able to supply Sprint with an estimated $1.1 billion in cash proceeds.
The new Mobile Leasing Solutions funding deal should help Sprint alleviate its working capital expenditures associated with leasing devices to its customers. The wireless carrier sold an estimated $1.3 billion of its leased device properties in return for approximately $1.1 billion of cash proceeds. Sprint should be able to receive the $1.1 billion money in the next few weeks, plus $186 million of contingent deferred consideration.
Unlike the previous deal that Sprint signed with Mobile Leasing Solutions, the latest deal will be treated as a financing transaction in the accounting records. That means that the device assists will be lumped in Property, Plant, & Equipment, and will be depreciated for the rest of their useful lives. As for the payments made to Mobile Leasing Solutions under the lease backs, they will be logged as principal payments and interest expense over the respective terms. If there are future changes in the fair value of the financing obligation, they will accounted for as earnings over the course of the deal.
As for the second new funding deal, Sprint took the opportunity to sign an 18 month bridge financing facility. Such a deal was arranged by Mizuho Bank (also under the Japan based Mizuho Financial Group), and is designed to bring in an additional $2 billion in funding to the major US wireless carrier’s liquidity.
In addition to the $2.2 billion of network related financing that Sprint announced earlier in April of this year, the two new funding deals mentioned (the second Mobile Leasing Solutions deal and the 18 month bridge financing facility) should prop up the wireless carrier’s liquidity position by over $5 billion in April.
