Sprint and SoftBank agree to $2.2 billion cash network deal

Sprint Corp. has agreed to a deal that will boost its cash holdings by $2.2 billion through a long-awaited transaction involving its parent company, SoftBank Group Corp., and investors.

The deal, announced Wednesday, requires Sprint to sell the group $3 billion worth of network assets that Sprint will then lease back to continue providing service to customers.

The network sale and lease deal is similar to a financing deal last December with SoftBank and others that delivered $1.1 billion in cash. In that deal, Sprint sold cellphones that it had leased to customers, who continued to use them under their original terms.

Both deals are aimed at bolstering the company’s finances at a time when investors are demanding high interest rates on existing Sprint bonds. The high rates make it too expensive to raise money issuing new debt or to pay off bonds that are coming due by issuing new bonds.

In an announcement, Sprint chief financial officer Tarek Robbiati said the funding would help the Overland Park company deal with debts that are coming due in the near future.

“Sprint and SoftBank have worked together again to create a unique structure that provides Sprint with an attractive source of capital,” Robbiati said. “This transaction is an important first step in addressing upcoming debt maturities and allows us to stay focused on our corporate transformation, which involves growing top line revenues and aggressively taking costs out of the business to improve operating cash flows.”

Sprint has set a target of cutting $2.5 billion out of its operating and equipment costs. It has eliminated about 2,500 jobs in that effort.

The wireless company said last year that it would put together a network equipment lease financing deal like the phone leasing deal. The announcement did not specify the assets being sold but said they “consist primarily of equipment located at cell towers.”

Sprint had talked about including some of its wireless spectrum in such a deal.

Sprint said it expects to complete the network financing deal next week. It said the effective cost of the financing will be comparable to a “mid-single-digit” interest rate on a loan.

In both funding efforts, Sprint’s Tokyo-based parent company is providing the money along with other firms. Sprint said it would repay the network funding money with “staggered, unequal payments through January 2018.”

This story was originally published April 6, 2016 at 4:40 PM with the headline "Sprint and SoftBank agree to $2.2 billion cash network deal."