Sprint Secures New $1.5-Billion Credit Line
Sprint Corp. said Tuesday that it received commitments for $1.5 billion in new bank loans, sending shares of the third-biggest U.S. long-distance telephone company up by 13%.
Sprint has no plans to draw against the unsecured bank line, and the company has enough money to repay $1.4 billion of debts coming due in the next 18 months, said Chief Financial Officer Robert Dellinger.
The new loans “show they are not desperate,” said John Maxwell, a telecommunications analyst at Waddell & Reed Financial, owner of 4.5 million Sprint shares as of March 31.
The phone company received new commitments from its banks--led by J.P. Morgan Chase & Co. and Citigroup Inc.--in the same month that rival WorldCom Inc. filed for the biggest bankruptcy in U.S. history and amid concern that Qwest Communications International Inc. may soon follow.
Sprint has a $3-billion credit line that is due to expire in August.
The new line replaces a $2-billion loan commitment that runs out in August 2003.
The new line is good for the next year with an option to extend it to 2004, the company said.
“We’re in the worst credit market for telecom ever; this is a strong vote of confidence for Sprint in a difficult market,” Dellinger said.
Sprint Chief Executive William Esrey is cutting jobs and capital expenses and trying to sell the company’s Yellow Pages directory unit to avoid having the company’s credit ratings lowered to “junk.”
Shares of the Overland Park, Kan., company tumbled 22% Friday on concern that Sprint may lack cash to fund operations after sales at its main phone unit dropped for six straight quarters.
Earlier this year, Sprint had as much as $4 billion of commercial paper outstanding.
After its credit ratings were reduced, the company replaced its commercial paper, or debt maturing in nine months or less, with longer-term bonds.
Sprint has $650 million in cash, a $500-million borrowing facility backed by wireless customer accounts and $700 million in borrowings associated with its directory publishing business, Dellinger said.
