Sprint bonds soar, CDS screams tighter on Softbank talks

By Danielle Robinson

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

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

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

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

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

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

Sprint confirmed it was in discussions with Softbank, but said there were no assurances it would result in a transaction or involve a change of control.

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

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

Sprint had aborted talks with MetroPCS several times this year, including as recently as late September, according to market rumors.

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

AT&T and Verizon are at the top of the food chain as the biggest and most dominant providers of wireless service, with 105m and 94m subscribers respectively.

Sprint has 56m subscribers, and the MetroPCS/Tmobile merger creates 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))