Clearwire Raising $300M In Capital, At Rate Of 14.75% Per Year (CLWR)

Clearwire Corporation (NASDAQ: CLWR) was up most of the day on news that its earnings report was not as bad and that subscriber growth was higher than expected.  Unfortunately, the company decided to announce the pricing of some $300 million in notes for its subsidiary Clearwire Communications LLC.

Unfortunately, Clearwire needs capital and junk bond buyers are buying this because they become first lien holders if a bankruptcy or reorganization were to occur.  Clearwire plans to use the net proceeds of this offering for the deployment of mobile 4G LTE technology alongside the mobile 4G WiMAX technology currently on its network and for the operation and maintenance of its networks and for general corporate purposes.

The $300 million comes at a rate of 14.75% as a first-priority senior secured note offering due in 2016 with a PAR issue price.  These notes are to be senior secured obligations of the company and will be guaranteed on a first-priority lien basis by certain of the company’s domestic subsidiaries; notes and the related guarantees will be secured by a first-priority lien by substantially all of Clearwire Communications’ and the guarantors’ assets.

In short these are very expensive and very encompassing loan funds that are due in only about four years.  The notes have not been registered and should be considered private placement notes which the public cannot get access to. 

Now that its shares are at such a low price, the market capitalization of Clearwire’s common stock is only $450 million.

JON C. OGG