Sprint - Nextel 2015 Annual Report Download - page 152

Table of Contents
Index to Consolidated Financial Statements
SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 19. Subsequent Events
Network Equipment Sale-Leaseback
In April 2016, certain wholly-owned subsidiaries of Sprint entered into agreements (Network Equipment Sale-Leaseback) to sell and lease-back certain
network equipment to unrelated bankruptcy-remote special purpose entities (collectively, "the Network LeaseCo SPEs"). Sprint sold certain network equipment
with a book value of approximately $3.0 billion to the Network LeaseCo SPEs which was used as collateral to raise approximately $2.2 billion in borrowings from
external investors, including SoftBank.
The Network LeaseCo SPEs are variable interest entities for which Sprint has been identified as the primary beneficiary. As a result, Sprint is required
to consolidate the Network LeaseCo SPEs and intercompany transactions and balances between Network LeaseCo and the wholly-owned Sprint subsidiaries will
be eliminated in consolidation. The network assets involved in the transaction, which consisted primarily of equipment located at cell towers, will remain on
Sprint's consolidated financial statements and will continue to be depreciated. Principal and interest payments on the borrowings from the external investors will be
paid back in staggered, unequal payments through January 2018.
New Unsecured Financing Facility
In April 2016, Sprint Communications entered into an unsecured financing facility for $2.0 billion . The terms of this facility provide for covenant
terms similar to those of the revolving bank credit facility, however, repayments of outstanding amounts cannot be re-drawn. The loan bears interest at a rate equal
to LIBOR plus a percentage that varies depending on the time of draw and matures in October 2017. Any amounts borrowed will be required to be repaid if certain
debt or equity securities are issued or certain asset sales occur, as set forth more specifically in the agreement. As of May 17, 2016 , no amounts had been drawn on
this facility.
Handset Sale-Leaseback Tranche 2
In April 2016, Sprint entered into a second transaction with MLS (Handset Sale-Leaseback Tranche 2) to sell and lease-back certain iPhone ® devices
leased to customers under the iPhone Forever or iPhone for Life programs. In contrast with the first MLS transaction, this sale-leaseback arrangement will be
accounted for as a financing transaction. Accordingly, the devices will remain in Property, plant and equipment, net in the consolidated balance sheets and will
continue to be depreciated to their estimated residual values generally over the lease term. The proceeds received will be reflected as cash provided by financing
activities on the consolidated statements of cash flows and payments made to MLS will be reflected as principal repayments and interest expense over the
respective terms. Future changes in the fair value of the financing obligation will be recognized in earnings over the course of the arrangement.
Upon closing of the transaction in May 2016, Sprint sold and leased-back approximately $1.3 billion in book value of leased devices for cash proceeds
totaling $1.1 billion and a DPP of $186 million , which will be settled at the end of the arrangement and is subject to certain device losses incurred by MLS.
Shentel Transaction
In April 2016, we received regulatory approval and the transaction was closed in May 2016 for a series of agreements we entered into in August 2015
with Shenandoah Telecommunications Company (Shentel) as a result of Shentel acquiring one of our wholesale partners, NTELOS Holdings Corp (nTelos). The
total consideration for this transaction to acquire certain assets such as spectrum, to amend our affiliate agreement with Shentel and to expand the area in which
Shentel provides wireless service to Sprint customers on more favorable economic terms included approximately $195 million , on a net present value basis, of
notes payable to Shentel. Sprint will satisfy its obligations under the notes payable over an expected term of five to six years. Approximately $110 million of the
total purchase price will be recorded as a loss in the quarter ended June 30, 2016, which related to the termination of our pre-existing wholesale arrangement with
nTelos.
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