Clearwire plans to sell $300 million worth of Class A common stock to raise cash for its planned TD-LTE network, which will be used to add capacity to Sprint's LTE network.
Sprint, Clearwire's largest shareholder, will buy a matching number of Class B shares. Clearwire also has the option to sell an additional $45 million in stock.
The stock sale and Sprint's contribution are expected to bring in more than $600 million to the cash-strapped WiMAX provider. The funds will go toward deploying Clearwire's LTE network and general corporate purposes, including the maintenance of its WiMAX operations.
The funding comes with a caveat, however. The sale will dilute the value of stock held by Clearwire's current shareholders by about 30 percent, according to estimates from The Associated Press.
Clearwire CEO Erik Prusch warned in November that the company was considering defaulting on a $273 million debt payment to conserve capital. A bankruptcy would have wiped out all of the value of Clearwire's shares.
Less than two weeks after Prusch's warning, Sprint came to Clearwire's rescue with $926 million worth of funding and additional cash for its TD-LTE network.
Clearwire disclosed in an SEC document filed yesterday that it has already received a $150 million cash infusion from Sprint. A company spokesman said the funds, recorded as a loan in its financial statement, will count as a prepayment against the $600 million Clearwire is slated to receive from Sprint next year.
The mending of relations between Sprint and Clearwire extends past the funding. Sprint CFO Joe Euteneuer said at an investor conference yesterday that the two companies were already collaborating on the deployment of Clearwire's TD-LTE network. Clearwire plans to install base stations where Sprint has the most need for capacity.
"It's very targeted to the areas where we know we're getting high demand," Euteneuer said. "We're really looking for a coordination to pick those points where it will maximize the return for both of us."