Wireless broadband networks operator Clearwire Corp. (CLWR), ventured to raise its capital by more than $3.0 billion through different equity and debt instruments. The capital raise is predominantly intended to strengthen Clearwire's 4G WiMAX network and also to repay certain debt facilities.
Clearwire's 4G service, called CLEAR, utilizes WiMAX technology, in 24 markets and provides pre-WiMAX communications services in 37 markets across the U.S. and Europe. The company also serves as the wholesale 4G network supplier for the next-generation wireless data products offered by several strategic investors.
Tuesday, the Kirkland, Washington-based company revealed a definitive agreement with a group of strategic investor to raise $1.564 billion in new investment capital in exchange for newly issued shares priced at $7.33 per share.
Among the investor group Sprint Nextel Corp. (S) will invest $1.176 billion, Comcast Corp.(CMCSJ.PK) has committed $196 million, Time Warner Cable Inc. (TWC) $103 million, Intel Corp. (INTC) $50 million, Eagle River Holdings LLC $20 million, and Bright House Networks, LLC for $19 million.
Upon the satisfactory conditions, Clearwire will receive about $1.057 billion in cash from the equity financing within five business days. Another $440 million in cash will be funded at a closing which is expected to occur by year end 2009, and the remaining $66 million will be funded at a closing which is targeted to be completed during first quarter 2010.
The investors in the financing round will receive newly issued Class B Units/Class B Shares, which will maintain pass through tax treatment for their investments. Newly issued Class B Units/Class B Shares will have the same economic and voting rights as existing Class B Units/Class B Shares and equivalent voting rights as existing Class A Common Stock.
Commenting on its efforts at capital strengthening, Clearwire's chief executive officer, Bill Morrow said, "This additional level of strategic funding marks another important milestone in the progress of Clearwire, and will enable us to maintain our leadership and aggressive 4G WiMAX network build plans. Today's news is also further validation of the importance of our 4G network to our strategic investors. We all benefit from this robust, all-IP, high-bandwidth network that delivers an unmatched combination of Internet speed and mobility."
Clearwire said that it would raise additional $1.45 billion of capital through an offering of new senior secured notes to repay its existing $1.40 billion credit facility.
The company also said that Sprint Nextel and Comcast, which are debt investors under Clearwire's existing facility, have agreed to receive replacement debt on the same terms as the new offering, effectively allowing Clearwire to raise an additional $240 million in capital assuming the new notes offering is fully subscribed.
The specific terms of the notes are not yet finalized. The new debt offering is intended to improve several of the company's existing credit terms by extending maturity and establishing a fixed interest rate. In addition, with an improved capital structure the company expects to expand its future borrowing capacity.
Separately, Clearwire said that it plans to launch a common stock rights offering, pursuant to which rights to purchase shares of its class A common Stock will be offered pro rata to holders of its class A common stock. Each right will be exercisable for about 0.4336 shares of class A common stock at a per share price of $7.33.
Clearwire plans to file a registration statement with the Securities and Exchange Commission to register the rights and the underlying class A common stock within the next 30 days, and to issue the rights once this registration statement is effective.
The company said that the rights offering will be open for a period of six months following the effective date of the registration statement. The parties to Clearwire's existing equityholders' agreement, dated November 28, 2008, have agreed not to exercise any rights received by them in the rights offering.
CLWR is currently trading at $6.90, up $0.10 or 1.47%, on a volume of 2.43 million shares on the Nasdaq. The stock has traded in a broad range of $2.64 - $9.42 for the past 52 weeks, with a three-month average volume of 1.82 million shares.
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