Sprint - Nextel 2012 Annual Report Download - page 59

Table of Contents
Liquidity and Capital Resource Requirements
To meet our short
- and long - term liquidity requirements, we look to a variety of funding sources. Our existing liquidity balance and cash
generated from operating activities is our primary source of funding. In addition to cash flows from operating activities, we rely on the ability to issue
debt and equity securities, the ability to issue other forms of financing, and the borrowing capacity available under our credit facilities, to support our
short
- and long - term liquidity requirements. However, we are currently precluded from issuing any equity securities under the SoftBank Merger. We
believe our existing available liquidity and cash flows from operations will be sufficient to meet our funding requirements through the next 12 months,
including debt service requirements and other significant future contractual obligations. To maintain an adequate amount of available liquidity and
execute according to the timeline of our current business plan, which includes Network Vision, subscriber growth, expected usage profiles of
smartphone customers and the expected achievement of a cost structure intended to achieve more competitive margins, we may need to raise
additional funds from external resources. If we are unable to fund our remaining capital needs from external resources on terms acceptable to us, we
would need to modify our existing business plan, which could adversely affect our expectation of long
- term benefits to results from operations and
cash flows from operations.
The terms and conditions of our new revolving bank credit facility, which expires in February 2018, require that the ratio (Leverage Ratio) of
total indebtedness to trailing four quarters earnings before interest, taxes, depreciation and amortization and other non
- recurring items, as defined by
the credit facility (adjusted EBITDA), not exceed 6.25 to 1.0 through June 30, 2014. Subsequent to June 30, 2014 the Leverage Ratio declines on a
scheduled basis, as determined by the credit agreement, until the ratio becomes fixed at 4.0 to 1.0 for the fiscal quarter ended December 31, 2016 and
each fiscal quarter ending thereafter.
The Company is currently engaged in discussions with our existing lenders for both the EDC and secured equipment credit facility and
intends to modify the terms to, among other things, provide covenant compliance ratio requirements that are similar to those required under our new
revolving bank credit facility and exclude the SoftBank Merger from the change of control provisions. If we are unsuccessful in our efforts, we would
be required to pay all amounts outstanding under these facilities upon the consummation of the SoftBank Merger. Additionally, although we expect to
remain in compliance with the covenants under our new revolving credit and secured equipment credit facilities through the next twelve months, our
leverage ratio under the EDC facility is more restrictive. To the extent we are unsuccessful in our efforts to amend the EDC facility; we have both the
ability and intent to pay off all amounts outstanding, totaling $500 million as of December 31, 2012. As of
December 31, 2012 and 2011 , our Leverage
Ratio, as defined by the EDC agreement and prior revolving credit facility, was
3.7 to 1.0.
In determining our expectation of future funding needs in the next 12 months and beyond, we have made several assumptions regarding:
Due to the significance and uncertainty of timing related to the SoftBank Merger and the Clearwire Acquisition, the cashflows from these
proposed transactions have not yet been fully taken into consideration in the future funding needs outlined above. Consummation of the transactions
is expected to occur in close proximity pending shareholder and regulatory approval for both transactions; however, the Company cannot predict
whether both, or either, transactions will be consummated or the timing of such consummation. Upon consummation we
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projected revenues and expenses relating to our operations;
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continued availability of our revolving bank credit facility in the amount of $2.8 billion , which expires in February 2018;
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anticipated levels and timing of capital expenditures, including the capacity and upgrading of our networks and the deployment of new
technologies in our networks, and FCC license acquisitions;
•
anticipated payments under the Report and Order, as supplemented;
•
any additional contributions we may make to our pension plan;
•
scheduled principal payments of $366 million;
•
payment of $480 million to acquire certain assets of U.S. Cellular;
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additional financing in the form of exchangeable notes to Clearwire not to exceed Sprint's minimum contractual commitment; and
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other future contractual obligations, including decommissioning obligations associated with Network Vision, and general corporate
expenditures.