Sprint Corporation has signed its second deal with Mobile Leasing Solutions, LLC (MLS) for the sale and lease-back of certain leased devices. Arranged by Mizuho Securities, this transaction is expected to provide the company with approximately $1.1 billion in cash proceeds. In a separate transaction, the company signed an 18-month bridge financing facility arranged by Mizuho Bank, LTD, providing $2 billion of additional liquidity. These transactions, in addition to the $2.2 billion of network-related financing that was announced earlier this month, have improved the company’s liquidity position by more than $5 billion in April.
Second MLS Transaction
By executing its second transaction with MLS, Sprint continues to help mitigate the working capital impacts associated with leasing devices to its customers. The company sold approximately $1.3 billion of leased device assets for approximately $1.1 billion of cash proceeds, which the company expects to receive in the coming weeks, and $186 million of contingent deferred consideration.
In contrast with the first MLS transaction, this sale lease-back arrangement will be accounted for as financing (on-balance sheet). Accordingly, the assets will remain in Property, Plant, & Equipment and will continue to be depreciated over their remaining useful lives. The payments made to MLS under the lease-backs 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.
MLS was formed by a group of equity investors including SoftBank and has obtained debt financing from several lenders including leasing companies and international and domestic banks. As with the first transaction, Brightstar Corp is providing its lease management and asset tracking system, as well as reverse logistics and device remarketing services. Also consistent with the first transaction, MLS executed a forward purchase agreement with Foxconn, which helps reduce the downside risk of future changes in device residual values.
Bridge Financing Facility
The 18-month bridge financing facility was arranged by Mizuho Bank, LTD and provides Sprint with $2 billion of liquidity as the company continues to execute its turnaround initiatives, densify and optimize its network, and progress towards other financing transactions in the future. The bridge facility contains a feature that permits the company to add up to $500 million in additional commitments.