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Global Credit Research - 13 Dec 2010
Approximately $3.85b in debt affected
New York, December 13, 2010 -- Moody's Investors Service has assigned a B2 rating to Clearwire
Communications LLC's ("Clearwire" or "the Company")
$175 million Senior Secured 1st Lien Notes due 2015 ("1st
Lien Notes"), a Caa2 rating to Clearwire's $500
million Senior Secured 2nd Lien Notes ("2nd Lien Notes") following
their successful issuance. Clearwire intends to use the proceeds
of the new debt issuance along with a $650 million (upsized from
$500 million) Exchangeable Note offering, primarily for general
corporate uses and network expansion. Moody's has simultaneously
upgraded Clearwire's existing Senior Secured 1st Lien Notes to B2
from Caa1 as a result of the issuance of the 2nd Lien and Exchangeable
Notes, which are both junior and offer loss protection to the 1st
Moody's has taken the following rating actions:
. Existing $2.52 Billion Senior Secured 1st
Lien Notes due 2015, Upgraded B2 (LGD2 -- 17%)
. New $175 Million Senior Secured 1st Lien Notes
due 2015, Assigned B2 (LGD2 -- 17%), Withdrew
former (P)B2 (LGD2-17%)
. New $500 Million Senior Secured 2nd Lien Notes
due 2017, Assigned Caa2 (LGD4 -- 49%), Withdrew
former (P) Caa2 (LGD4 -- 52%)
Clearwire's Caa1 corporate family rating (CFR) and Caa2 probability
of default rating (PDR) remain under review with direction because of
the fluid situation regarding the Company's ability to fund the full build-out
of its business plan and its relationship with its key strategic partner.
As part of its ongoing review Moody's will assess the likelihood and magnitude
of additional funding from Sprint in the context of Clearwire's total
financing needs to complete its nationwide build out. Moody's views
the just completed debt issuance as a means for Clearwire to prolong its
existence and operate within its year-end 2010 footprint,
while strategic direction from Sprint and other key investors is further
Clearwire's corporate family rating reflects the company's
early-stage operations which are characterized by high capital
investment and large operating losses. The rating is supported
primarily by Clearwire's deep and broad wireless spectrum holdings
which represent significant collateral.
The 1st Lien Notes B2 rating reflects their secured status and priority
claim on all assets of the company. The 1st Lien Notes are rated
two notches above below the company's CFR due to the significant
liabilities, both debt and non-debt which are junior to the
1st Lien Notes and the above average recovery value attributable to Clearwire's
The 2nd Lien Notes Caa2 rating incorporates their secondary claim on the
company's assets and is one notch below the company's CFR.
The 2nd Lien notes derive some loss protection from the $650 million
in exchangeable notes which were issued coincident with the 1st Lien add-on
and the 2nd lien notes. Moody's LGD point estimate for the
2nd Lien notes improved slightly due to the upsizing of the exchangeable
notes from the $500 million initially proposed.
Moody's views Clearwire's liquidity as good, and projects
the company will exit 2010 with approximately $2.0 billion
in cash, including the proceeds from the notes offerings.
Clearwire does not maintain a revolving credit facility.
If the dispute with Sprint lingers and Clearwire does not obtain additional
funding, its operating and financial profile may well come under
significant pressure, which could have negative implications for
If Sprint and Clearwire quickly come to an agreement and Clearwire receives
the funding that it needs to continue rapid expansion of 4G coverage,
Clearwire's earnings and financial profile could become stronger than
we currently envision and the investment would solidify the strategic
importance of Clearwire to Sprint.
The last rating action taken by Moody's on Clearwire was on December
2, 2010 when Moody's assigned provisional ratings to the $175
million 1st Lien notes and $500 million 2nd Lien notes as discussed
The principal methodologies used in this rating were Global Telecommunications
Industry published in December 2007, and Loss Given Default for
Speculative-Grade Non-Financial Companies in the U.S.,
Canada and EMEA published in June 2009.
Clearwire Corporation provides wireless high-speed services to
over 50 markets in the U.S. as well as a few markets in
Europe. The Company maintains its headquarters in Kirkland,
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Alexandra S. Parker
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's Assigns Definitive Ratings to Clearwire's New Notes, Rating Remains on Review
250 Greenwich Street
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