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Sprint bonds soar, CDS screams tighter on Softbank talks

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By Danielle Robinson

Oct 11 (IFR) - Sprint Nextel Corp bonds soared more than 10points on Thursday and the cost of insuring its debt re-pricedto trade as if the company was rated investment grade, on newsthat Softbank Corp is in talks to buy about two thirds of the UStelecoms company for more than US$12.8bn.

The single B-plus rated Sprint 6.875% bonds due 2028 weretrading 10.5 points higher at $102.25 in extremely high volume.

The cost of insuring Sprint debt against potentialdefault fell sharply with five-year credit default swaps (CDS)trading 146 basis points (bp) tighter at 335bp bid, 355bpoffered, similar to where they would trade if the company wererated low investment grade.

Softbank , Japan's third-largest mobile carrier, israted triple B by S&P and Baa3 by Moody's.

The tightening of Sprint's CDS means it now costs $335,000to $355,000 a year for five years to insure $10 million of thecompany's debt.

Softbank , Japan's third-largest mobile carrier, israted triple B by S&P and Baa3 by Moody's, putting it at thelower end of investment grade.

Sprint confirmed it was in discussions with Softbank, butsaid there were no assurances it would result in a transactionor involve a change of control.

The news is the first sign that Sprint has an alternativestrategy to offer investors, following aborted efforts to cometo a merger agreement with smaller US telecom company, MetroPCS.

Last week Sprint's 2028s plunged 1.5 points in dollar priceto $90.5 on news that MetroPCS and T Mobile were merging. Thatdeal was viewed as giving T Mobile a fighting chance in the USagainst telecom giants Verizon and AT&T, while leaving Sprintout in the cold with no obvious strategy.

Sprint had aborted talks with MetroPCS several times thisyear, including as recently as late September, according tomarket rumors.

The MetroPCS/T Mobile merger marked the beginning ofmuch-needed consolidation in a bloated US telecom market.

AT&T and Verizon are at the top of the food chain as thebiggest and most dominant providers of wireless service, with105m and 94m subscribers respectively.

Sprint has 56m subscribers, and the MetroPCS/Tmobile mergercreates a company with 42.5m customers.

(Reporting by Danielle Robinson; Editing by Ciara Linnane)

((danielle.robinson@thomsonreuters.com; Reuters messaging;danielle.robinson.thomsonreuters.com@reuters.net))

Keywords: SPRINT BONDS/