Dish Bid Divides Sprint Lenders, Owners

Investors praise takeover offer, while bondholders worry about hike in leverage.

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.

Better Benefits

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.

Separate Challenges

“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.

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