Sprint - Nextel 2012 Annual Report Download - page 135

Table of Contents
SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Bond Agreement
Pursuant to the Bond Agreement, on October 22, 2012, Sprint issued a convertible bond (Bond) to New Sprint, with a face amount of
$3.1
billion , stated interest rate of 1%, and maturity date of October 15, 2019, which is convertible into 590,476,190 shares of Sprint common stock at $5.25
per share, or approximately
16.4% upon conversion of the Bond (based on Sprint common shares outstanding as of December 31, 2012 ), subject to
adjustment in accordance with the terms of the Bond Agreement. This conversion feature remains in effect in the event the merger does not close.
Interest on the Bond will be due and payable in cash semiannually in arrears on April 15 and October 15 of each year, commencing on April 15, 2013.
Upon receipt of regulatory approval, the Bond will be converted into Sprint shares immediately prior to consummation of the SoftBank Merger and
may not otherwise be converted prior to the termination of the Merger Agreement. Conversion of the Bond is subject in any case to receipt of any
required approvals and, subject to certain exceptions, receipt of waivers under the Company's existing credit facilities. Subject to certain exceptions,
SoftBank may not transfer the Bond without Sprint's consent.
Merger Agreement
Upon consummation of the SoftBank Merger, which is subject to various conditions, including Sprint shareholder and regulatory approval,
SoftBank will fund New Sprint with additional capital of approximately
$17.0 billion , of which approximately $12.1 billion will be distributed to Sprint
shareholders as merger consideration with the remaining $4.9 billion held in the cash balance of New Sprint for general corporate purposes, including
but not limited to the Clearwire Acquisition. Pursuant to the terms and subject to the conditions described in the Merger Agreement, upon
consummation of the SoftBank Merger, outstanding shares of Sprint common stock, except as otherwise provided for in the Merger Agreement, will be
converted, at the election of Sprint shareholders, into (i) cash in an amount equal to
$7.30 for each share of Sprint common stock or (ii) one share of
New Sprint common stock for each share of Sprint common stock, subject in each case to proration such that a stockholder may receive a combination
of cash and New Sprint common stock.
Upon consummation of the SoftBank Merger, SoftBank will receive a five - year warrant to purchase 54,579,924 shares in New Sprint at $5.25
per share which would yield approximately
$300 million in proceeds upon exercise. Upon consummation of the SoftBank Merger, (i) Sprint will become
a wholly - owned subsidiary of New Sprint, (ii) New Sprint will be a publicly traded company, (iii) SoftBank will indirectly own approximately 70% of
New Sprint on a fully diluted basis, and (iv) the former shareholders and other equityholders of Sprint will own approximately
30% of the fully diluted
equity of New Sprint. The SoftBank Merger is subject to various conditions, including receipt of required regulatory approvals and approval of
Sprint's shareholders, and is expected to close in mid
- 2013.
Under the terms of the Export Development Canada (EDC) facility, the secured equipment credit facility and our revolving credit facility,
consummation of the SoftBank Merger would constitute a change of control that would require repayment of all outstanding balances thereunder.
Amounts outstanding under the EDC facility and secured equipment credit facility, which were approximately
$796 million in the aggregate at
December 31, 2012, would become due and payable at the time of closing. In addition, our
$2.2 billion revolving bank credit facility would expire upon a
change of control, of which approximately $925 million was outstanding as of December 31, 2012 through letters of credit, including the letter of credit
required by the Report and Order (see note 13). Sprint is currently in discussions with existing lenders and intends to amend these facilities to, among
other things, exclude the SoftBank Merger from the change of control provisions.
As of the date the Merger Agreement was entered into, approximately
$8.8 billion of our senior notes and guaranteed notes provided
holders with the right to require us to repurchase the notes if a change of control triggering event (as defined in our indentures and supplemental
indentures governing applicable notes) occurred, which included both a change of control and a ratings decline of the applicable notes by each of
Moody's Investor Services and Standard & Poor's Rating Services. On November 20, 2012, Sprint announced that it had obtained the necessary
consents to amend the applicable provisions of the outstanding indentures such that the SoftBank Merger would not constitute a change of control
and, as a result indebtedness outstanding under Sprint's applicable indentures will not become payable by reason of completion of the SoftBank
Merger.
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