RealTime IT News

Creditors Float Sprint Another $1 Billion

Sprint has finally found a way to pay off its short-term debt, securing an additional $1 billion to its $5 billion credit facility, officials announced Friday.

The long-distance and wireless phone giant secured the nine-month loan by putting its directory publishing business up for collateral with creditors Citibank N.A. and Deutsche Bank AG.

Sprint also announced plans to cut overall capital spending in 2002 by $400 million, down from its projected $6.8 billion goals.

The loan extension is good news for the struggling company, which has seen its stock plummet to three-year lows over fears Sprint would not be able to find a money solution to its short-term debt.

Executives dodge a financial bullet that has already hit one other phone carrier in the nation, Qwest Communications . The carrier has spent the past month looking for credit help to pay off $4 billion in short-term debt.

Mark Bonavia, Sprint spokesperson, said the company would only withdraw from their credit facility when needed, with the now-available funds used to pay down near-term debt.

"This is a capital expenditure (CAPEX) cut, an across the board kind of cut, with no specific areas or suspension in growth initiatives," he said. "It's pretty straightforward."

He also said cost-cutting measures will have no affect on its employee, with no job cuts expected for the immediate future.

Also saving the company money is the inadvertent savings relief that comes from the delay in the Federal Communications Commission over wireless spectrum from the once-defunct but now reborn NextWave Telecom.

Sprint had set aside funds in 2002 with the expectation it would have the spectrum to boost its digital wireless phone business in the U.S.

Sprint put down an undetermined deposit to the FCC, which has so far refused to return the money to spectrum buyers. Currently, the regulatory body is trying to appeal a federal court ruling that said it had no right to sell the spectrum off to the highest bidder and will make no decision on deposits until a ruling comes back.

Sprint's wireless phone division is where most of Sprint's money problems have stemmed to date, as the carrier competes with a suddenly-crowded field of competitors for digital wireless phone subscribers while expanding it's coverage area.

Sprint executives still expect their FON and PCS division to become year cash-flow positive sometime this year.