* Clearwire evaluating if it will pay interest-WSJ
* Comment may be negotiating tactic-analyst
* Sprint may provide funding by year-end- analyst
* Clearwire declines comment
* Clearwire shares fall as low as $1.28
(Adds Clearwire's decline to comment, analyst comment, share
(Reuters) - Shares of Clearwire Corp
plunged as much as 31 percent after a Wall Street Journal
report quoted its CEO as saying the company was considering
skipping a $237 million interest payment due Dec. 1.
Shares of the cash-strapped high-speed wireless firm
dropped as low as $1.28 as investors worried that their fears
about bankruptcy could be realized. The stock regained some
ground to close at $1.47, down 20 percent, on the Nasdaq.
Clearwire said it "does not comment on speculation" and
declined to discuss the story.
Clearwire, which is majority owned by its biggest customer
Sprint Nextel Corp , has been seeking almost $1 billion in
funding to keep operating and to upgrade its network. The two
companies, which have a rocky relationship, have been
negotiating for an extension of their network agreement.
One analyst said that Clearwire's Chief Executive Officer
Erik Prusch may have used the interview comments as a lever to
try to force a new network agreement with Sprint, which uses
Clearwire's wireless airwaves for its own services.
"I think they're using the interest payment as a
negotiating tactic with Sprint," said Mizuho analyst Michael
Nelson. "Sprint has the most to lose if Clearwire defaults on
its debt and files for bankruptcy."
Clearwire had said earlier this month that it had enough
cash on its balance sheet to meet the interest payment and keep
operating for 12 months. But according to the Journal,
Clearwire is not sure that paying up is in its best interests.
"It's a very expensive payment that we have," Chief
Executive Erik Prusch told the Journal. "It would be a
significant drain of our cash, so we have to evaluate
everything in terms of our decision of where we're going."
Prusch also told the Journal that he has a number of
advisers looking at strategic options but he declined to
comment on whether the company would restructure its debt in or
out of bankruptcy court, according to the story.
He told the paper that Clearwire would have a 30-day grace
period should it fail to make the payment by Dec. 1.
The comments likely mean that Clearwire is not making much
progress in its efforts to secure funding, Mizuho's Nelson
"It's extremely risky. All sides are playing hardball right
now," Nelson said, adding that Sprint would be at a
disadvantage if Clearwire started negotiating with debtholders,
who would be first in line to be repaid in a bankruptcy.
"It would really tighten the screws on Sprint to come up
with an amicable solution before Dec. 31," if Clearwater didn't
pay, said Nelson. "They certainly have the option of not making
the interest payment. Then they potentially default, unless
they're able to negotiate a solution with their debtholders."
Investor fears for Clearwire heightened on Oct. 7 when
Sprint told investors at its analyst meeting that a Clearwire
bankruptcy could be "constructive."
At the end of the third quarter Clearwire had about $4
billion in long-term debt and $711 million in cash and
investments on its balance sheet.
Clearwire is looking to upgrade its network with a
high-speed wireless technology known as LTE but it needs $600
million in financing to do that along with up to $300 million
to fund its operations.
Sprint is also upgrading its own network with LTE, and has
said it is looking to extend its agreement with Clearwire to
While some analysts said Prusch's comments could suggest a
higher likelihood of bankruptcy, others disagreed.
Macquarie Capital analyst Kevin Smithen said Sprint would
come to Clearwire's rescue and that he does not expect
Clearwire to default.
"We expect that (Sprint) will inject $500-600 (million)
into (Clearwire) by year-end at the latest in the form of a
prepayment or loan," he said.
Sprint was not immediately available for comment.
Sprint shares closed down 8 cents, or 3 percent, at $2.62
on the New York Stock Exchange.
(Reporting by Edwin Chan in Los Angeles and Sinead Carew in
New York; editing by Gerald E. McCormick, Bernard Orr)
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