Fitch: Sprint Remains on Watch Positive with US Unwired Acquisition Announcement.CHICAGO -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has maintained the Rating Watch Positive for Sprint Corporation's (Sprint) 'BBB' senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. rating following the announcement to acquire US Unwired Inc. (US Unwired) for approximately $1.3 billion. Fitch initially placed Sprint and Nextel Communications, Inc. (Nextel) on Rating Watch Positive on Dec. 15, 2004, following their announcement to combine in a merger of equals. Fitch's rating action recognizes the prospective competitive position of the combined Sprint Nextel as well as its good prospects for continued cash flow growth and increased financial flexibility. As of the first quarter 2005, Fitch estimates that the combined companies generated more than $11 billion of cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses on a last-12-month (LTM LTM abbr. long-term memory ) basis. Additionally, the combined companies produced free cash flow in excess of $4 billion on an LTM basis. This financial flexibility is measured against a combined debt total of approximately $25 billion and outstanding cash and short-term securities of approximately $6.7 billion. The Rating Watch also reflects the expected spin-off of Sprint's local telephone division (LTD LTD 1 Laron-type dwarfism 2 Leukotriene D 3 Long-term depression, see there 4. Long-term disability ) in 2006, resulting in material proceeds to Sprint Nextel. In the transaction associated with US Unwired, Sprint will commence a cash tender for all of US Unwired common stock at a price of $6.25 per share. Sprint will also acquire US Unwired net debt of $266 million. US Unwired provides Sprint PCS (1) (Personal Communications Services) Refers to wireless services that emerged after the U.S. government auctioned commercial licenses in 1994 and 1995. This radio spectrum in the 1. services in 48 markets to approximately 500,000 direct wireless subscribers. Fitch estimates that US Unwired generated operating EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become of approximately $107 million on a LTM basis as of first-quarter 2005. As part of the agreement, Sprint and US Unwired will seek an immediate stay of pending litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. between the two companies, which could have resulted in a potential obstacle in completing the Sprint and Nextel merger in a timely manner. Sprint will be able to fund this transaction from its outstanding cash balance. Fitch acknowledges that there is some risk that additional Sprint affiliates could seek a similar buyout, but Fitch expects that this risk is more of a medium-term event risk. None of the remaining Sprint affiliates are in current litigation with Sprint, regarding the merger with Nextel, and Fitch believes the recent consolidation of the affiliate operations, particularly related to individual activities by Alamosa PCS and iPCS lend themselves to value creation over a longer period of time rather than a short-term buyout. Nevertheless, Fitch will continue to monitor the affiliate situation in resolving the Rating Watch status. Other considerations in the Rating Watch include the final capital structure of Sprint Nextel, the financial prospects of the combined entity, the spin-off of the LTD operations, and the contingent liability associated with the change in control provision in Nextel's agreement with Nextel Partners. Fitch's rating definitions are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies and relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from this site, at all times. This document will remain on the public site for seven days. |
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