Sprint Corporation signed a deal with newly formed Mobile Leasing Solutions, LLC for the sale and lease-back of certain leased devices which is expected to provide the company with approximately $1.1 billion in cash proceeds at closing. The cash proceeds are part of approximately $1.2 billion in total consideration that are expected to be exchanged for approximately $1.3 billion of leased device assets. The transaction, which is expected to close in the first week of December, will immediately improve the company’s liquidity position and the funding comes at an attractive cost of capital, which is well below Sprint’s alternatives in the high-yield debt market. The transaction also establishes a repeatable structure for mitigating the working capital impacts associated with leasing devices to Sprint’s customers.
“Sprint and SoftBank have worked together to create a unique structure that advances a very high percentage of the total value of certain devices leased to our customers, including the device residual values,” said Sprint CFO Tarek Robbiati. “Providing mobile devices to customers is the biggest use of cash in the carrier model and with this new structure we have more closely aligned Sprint’s cash flows with those associated with leasing devices to our customers.”
Mobile Leasing Solutions, LLC was formed by a group of equity investors including SoftBank and has secured debt financing from several lenders including international banks and leasing companies. Brightstar Corp. through its Financial Services Business provided support in structuring the transaction, including assisting in the formation of Mobile Leasing Solutions, LLC which is utilizing Brightstar’s Lease Management and Tracking System. Brightstar has also been contracted to provide reverse logistics and device remarketing services, which will include a forward purchase agreement that is being finalized with Foxconn, thus minimizing the downside risk of future changes in device residual values.
Receivables Facility Amendment Provides Additional Liquidity
Sprint amended its existing Receivables Facility to include the sale of future lease receivables, thus increasing the maximum funding limit by $1 billion to a total of $4.3 billion. These lease receivables are related to devices not included in the aforementioned transaction with Mobility Leasing Solutions, LLC.
Updated Financial Outlook
The company’s previous expectation for fiscal year 2015 Adjusted EBITDA was $7.2 to $7.6 billion. Based solely on the inclusion of transformation program costs and the sale and lease-back of certain leased devices to Mobile Leasing Solutions, LLC, which is accretive to free cash flow, the company now expects fiscal year 2015 Adjusted EBITDA* to be between $6.8 to $7.1 billion.