Sprint Nextel Corp. bondholders are at odds with shareholders from Leon Cooperman to John Paulson who’ve praised a takeover bid from Dish Network Corp. that may amplify the largest junk issuer’s debt load by 31 percent.
Average yields for Sprint’s $20 billion of bonds, which had plunged 1.33 percentage points to 4.64 percent since the third-largest U.S. mobile-phone company said in October it may receive a “substantial” investment from Softbank Corp., have jumped 0.31 percentage point this week following Dish’s unsolicited offer. That contrasts with a 15 percent stock surge for Sprint.
A combined company would be able to cut its debt load while investing in the business, said Tom Cullen, a Dish spokesman. As much as $2.9 billion of savings in the first two years following a completed transaction would help the company “to deleverage quickly,” he said.
“Sprint bondholders are obviously not pleased with this,” Robert Rock, the Boston-based head of credit research at Manulife Asset Management, said in a telephone interview. Rock estimates that two-thirds of new debt that would be raised to complete a takeover by Dish would rank above existing Sprint bondholders.