Reality: The Note Purchase Agreement with Sprint provides liquidity to Clearwire to continue operations and build out its network during the pendency of the merger.
- Multiple components contribute to the value of the exchangeable note, including the coupon, the exchange price, and when the notes may be exchanged, which must all be considered together; and
- The $1.50 exchange rate represents a premium to the unaffected share price prior to the Sprint-SoftBank rumors when Clearwire was speculated to be part of that transaction – Clearwire shares closed at $1.30 on October 10, 2012.
Misperception #4: Financial Restructuring/Bankruptcy Would Result in Higher Value for Stockholders
Reality: There is significant uncertainty for stockholders in a financial restructuring filing.
- The value stockholders could receive in a financial restructuring is subject to many uncertainties, including:
- The existence of buyers in an auction for the entire Company;
- The ability to sell the entire spectrum portfolio without flooding the market at non-distressed prices;
- Potential taxes on spectrum sales which could materially reduce value to stockholders; and
- Potential damages claims by Sprint which could be substantial and could reduce value to stockholders, among others.
- The outcome is unlikely to yield value to stockholders exceeding Sprint's $2.97 per share offer.
- There are significant risks and challenges to the proposed alternatives, which are preliminary and non-binding, and if they cannot be mitigated, it is unlikely they will provide greater stockholder value than the Sprint offer;
- A spectrum sale does not solve the fundamental need for significant additional revenues, and would not provide sufficient liquidity for operations;
- Additional financing may be challenging, expensive and dilutive to stockholders, if available at all; and
- Clearwire's difficult liquidity situation will put it in a worse position to negotiate any other strategic transaction, and financial restructuring may be the only available alternative.
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