Sprint - Nextel 2008 Annual Report Download - page 46

‰any additional investment we may choose to make in Clearwire;
‰certain costs of compliance with regulatory mandates; and
‰other general corporate expenditures.
Liquidity
As of December 31, 2009, our cash and cash equivalents and short-term investments totaled $3.9 billion.
In addition, we have $2.7 billion available under our existing revolving bank credit facility, which expires in
December 2010.
The terms and conditions of our revolving bank credit facility require the ratio of total indebtedness to
trailing four quarters earnings before interest, taxes, depreciation and amortization and certain other
non-recurring items, as defined by the credit facility (adjusted EBITDA), to be no more than 4.25 to 1.0. As of
December 31, 2009, the ratio was 3.5 to 1.0 as compared to 3.0 to 1.0 as of December 31, 2008 resulting from
our decline in adjusted EBITDA. Under this revolving bank credit facility, we are currently restricted from
paying cash dividends because our ratio of total indebtedness to adjusted EBITDA exceeds 2.5 to 1.0. The terms
of the revolving bank credit facility provide for an interest rate equal to LIBOR, plus a margin of between 2.50%
and 3.00%, depending on our debt ratings. Certain of our domestic subsidiaries have guaranteed the revolving
bank credit facility. As of December 31, 2009, we had $1.8 billion in letters of credit outstanding, including a
$1.7 billion letter of credit required by the Report and Order to reconfigure the 800 MHz band, and no
outstanding balance under our $4.5 billion revolving bank credit facility. As a result of the outstanding letters of
credit, which directly impacts the availability of the revolving bank credit facility, we had $2.7 billion of
borrowing capacity available under our revolving bank credit facility as of December 31, 2009.
A default under our credit facilities could trigger defaults under our other debt obligations, including our
senior notes, which in turn could result in the maturities of certain debt obligations being accelerated. The
indentures that govern our outstanding senior notes also require that we comply with various covenants,
including limitations on the incurrence of indebtedness and liens by us and our subsidiaries. We expect to remain
in compliance with these covenants through at least the end of 2011, although there can be no assurance that we
will do so. Although we expect to improve our post-paid subscriber results, if we do not meet our plan,
depending on the severity of the actual subscriber results versus what we currently anticipate, it is possible that
we would not remain in compliance with our covenants or be able to meet our debt service obligations, which
could result in acceleration of our indebtedness. If such unforeseen events occur, we may engage with our lenders
to obtain appropriate waivers or amendments of our credit facilities or refinance borrowings, although there is no
assurance we would be successful in any of these actions.
Sprint’s current liquidity position makes it likely that we will be able to meet our debt service
requirements and other funding needs at least through 2011. Specifically, we expect to be able to meet our
currently identified funding needs through at least the end of 2011 by using our anticipated cash flows from
operating activities as well as our cash, cash equivalents and short-term investments on hand. In addition, we also
have available the remaining borrowing capacity under our revolving bank credit facility of $2.7 billion through
December 19, 2010. Nevertheless, if we are unable to reduce the rate of losses of post-paid subscribers in 2010, it
would have a significant negative impact on cash provided by operating activities and our liquidity in future
years.
In determining that we expect to meet our funding needs through at least 2011, we have considered:
‰anticipated levels of capital expenditures and FCC license acquisitions;
‰anticipated payments under the Report and Order, as supplemented;
‰any contributions we may make to our pension plan, which has been negatively impacted by the
high degree of volatility in the global financial markets;
‰scheduled debt service requirements;
‰any additional investment we may choose to make in Clearwire; and
‰other future contractual obligations.
44