Citing pressures in wireless industry and company’s debts, Moody’s cuts Sprint’s debt rating
Moody’s Investors Service has cut Sprint Corp.’s credit rating, adjusting it to six levels below investment grade.
The credit rating agency cut Overland Park-based Sprint to B3 from B1, citing “brutal competition” in the U.S. wireless industry that will pressure even the strongest operators.
The New York-based ratings firm also cast doubt on the telecom operator’s ability to refinance more than $12 billion of debt coming due in the next five years without additional support from its majority shareholder – Tokyo-based Softbank Group.
The rating reduction was based on the company’s “highly leveraged capital structure, intense competitive challenges, a deteriorating liquidity position,” Moody’s analysts, led by Dennis Saputo, wrote in the report. “The negative outlook reflects our belief that Sprint is going to need significant additional funding. It remains uncertain whether or not the capital markets will be receptive to additional funding.”
Sprint’s $4.25 billion of 7.875 percent notes due in 2023 have dropped to 90.75 cents on the dollar from 98.6 cents at the start of the week, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
“This is an off-cycle action by Moody’s without any input from the company,“ said Dave Tovar, a spokesman for Sprint. ”We have a funding plan to support our turnaround efforts and our goal would be to not raise additional capital from the public debt or equity markets or sell spectrum in the foreseeable future. We are leveraging our business relationship with Softbank and working closely with them to finalize our funding plan in the coming months.”
Standard & Poor’s also has a negative outlook on Sprint’s bonds and grades them B+, or four levels below investment grade.
This story was originally published September 16, 2015 at 11:03 AM with the headline "Citing pressures in wireless industry and company’s debts, Moody’s cuts Sprint’s debt rating."