Sprint Nextel was the subject of a number of actions by ratings services Friday following its announcement that it plans to issue bonds in a private placement and may use proceeds to fund Clearwire.
Sprint, majority owner of Clearwire, received a debt ratings downgrade from Standard & Poor's Ratings Services, which cited costs for upgrades to Sprint's network and the rollout of its high-speed 4G network – things that will hurt its margins and increase capital spending in the short term.
S&P's downgrade included Sprint's corporate credit rating, which was lowered to "B+" from "BB-." S&P, which has a "Negative" outlook for Sprint, believes that sales of Apple's iPhone – which recently joined the lineup of phones Sprint subsidizes for customers – will pressure its margins, too, because of costs related to bringing in new users. S&P added in its statement that there is "still strategic uncertainty" in Sprint's relationship with Clearwire.
Moody's Investors Service on Friday rated Sprint's proposed bond offering "B3." Moody's lowered Sprint's senior unsecured ratings to "B3" from "B2" and raised Sprint's speculative grade liquidity ratings to "SGL-3" from "SGL-4." It continues to review Sprint's ratings for possible downgrade.
And Fitch Ratings set a "BB/RR2" rating on Sprint's notes due in 2018 and a "B+/RR4" rating for notes due in 2021. Fitch said that the bonds take a "material step" toward lowering refinancing risks and helping Sprint's "constrained liquidity position."