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23 Jan 2009
Approximately $ 1.41 Billion of Debt Securities Affected
New York, January 23, 2009 -- Moody's Investors Service assigned first-time ratings to Clearwire
Communications LLC ("Clearwire") (corporate family rating
of Caa1 and speculative grade liquidity rating of SGL-2) with a
negative outlook. The ratings for Clearwire reflect the company's
high financial and business risk given the start-up nature of its
operations. In addition, while Clearwire will operate as
an independent company, we believe that there will be significant
challenges to developing the business, in part due to the diverse
objectives of its strategic investors.
The following first time ratings/assessments were assigned:
Clearwire Communications LLC:
Corporate Family Rating -- Caa1
Probability of Default Rating -- Caa2
Speculative Grade Liquidity Rating -- SGL-2
Rating Outlook -- Negative
Clearwire Legacy LLC and Clearwire XOHM LLC (Co-Borrowers):
$1.234 Billion Senior Secured Term Loan due May 2011 --
B3 (LGD-2, 24%)
$179 Million Incremental Sprint Term Loan due May 2011 --
Caa3 (LGD-5, 70%)
Specifically, the ratings reflect the cash absorptive nature of
the business as operating losses are expected to continue for the near
future and capital expenditures for network expansion are expected to
be significant. In addition, the company faces considerable
execution risk associated with its start-up business operations,
which involves extensive new build and (excluding its investors) direct
competition with much larger, better-capitalized cable and
telephony service providers. The company will confront declining
liquidity over time that is further compounded by limited access to public
capital, in Moody's estimation.
The ratings benefit from the company's extensive spectrum holdings
that not only hold the potential for the development of a technologically
advanced mobile broadband network, capable of delivering a full
bundle of services including video, telephony and high-speed
Internet access, but also provide very strong loan-to-asset
coverage. Furthermore, the company's management team
is experienced in launching new businesses and Moody's believes
that the company has adequate capital to fund its expansion over the next
two years as a result of the $3.2 billion investment by
new strategic investors.
The negative outlook reflects Moody's concern about the short term nature
of the company's capital structure and the inherent need to refinance
looming maturities while building out its network.
The B3 (LGD-2, 24%) rating assigned to the $1.234
billion Senior Secured Term Loan reflects the fact that it is secured
by substantially all assets (including Domestic and International spectrum
assets) and is guaranteed, on a joint and several basis, by
all material operating subsidiaries.
The Caa3 (LGD-5, 70%) rating on the $179 million
Incremental Sprint Term Loan incorporates these same factors but recognizes
that the Sprint Term Loan is subordinated in payment in bankruptcy,
via an inter-creditor agreement, to the $1.234
billion Senior Secured Term Loan.
The SGL-2 speculative grade liquidity rating recognizes the company's
good liquidity provided by a large cash balance (over $3.0
billion) and lack of near-term debt maturities. While cash
on hand is expected to fund the company over the course of the next twelve
months, contributing significantly to the SGL-2 rating,
longer term challenges are significant given the company's expected cash
burn through 2009 and the lack of a committed liquidity backstop facility.
This is the first time that Moody's has rated Clearwire.
The principal methodology used in rating Clearwire was that for Moody's
Global Telecommunications Industry (December 2007), which can be
found at www.Moodys.com in the Credit Policy & Methodologies
directory, in the Ratings Methodologies subdirectory. Other
methodologies and factors that may have been considered in the process
of rating this issuer can also be found in the Credit Policy & Methodologies
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,
Alexandra S. Parker
Corporate Finance Group
Moody's Investors Service
Moody's assigns Caa1 corporate family rating to Clearwire; outlook negative
Senior Vice President
Corporate Finance Group
Moody's Investors Service
No Related Data.
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