Item 1.01 Entry into a Material Definitive Agreement.
On April 5, 2016, certain wholly-owned subsidiaries (each, a “
Lessee
” and, collectively, the “
Lessees
”)
of Sprint Corporation (“
Sprint
”) entered into a series of agreements (the “
Equipment Sale Leaseback
”) to sell, for an aggregate purchase price of approximately $3.4 billion, certain network equipment (collectively,
the “
Equipment
”) to unrelated bankruptcy-remote special purpose entities (each, an “
SPV
” and, collectively, the “
SPVs
”), which Equipment will simultaneously be leased back to the Lessees. The
Equipment Sale Leaseback will provide additional liquidity and funding for the ongoing business needs of Sprint and its subsidiaries. The consummation of the transactions under the Equipment Sale Leaseback, including payment of the Cash Purchase
Price (defined below), is expected to occur on or about April 12, 2016, subject to the satisfaction of customary closing conditions.
The material documentation for the Equipment Sale Leaseback includes (i) the sale agreements (each a “
Sale Agreement
”
and together, the “
Sale Agreements
”), each between an SPV and one or more Lessees, (ii) the Master Lease Agreement (the “
Master Lease Agreement
”), by and between the Lessees and the SPVs, and, (iii) the
Guaranty, by Sprint in favor of the SPVs (the “
Guaranty
”), each of which agreement was dated as of March 31, 2016 and effective as of April 5, 2016.
Pursuant to the Sale Agreements, the Lessees will sell the Equipment to the SPVs in exchange for (i) a cash purchase price of
approximately $2.2 billion (the “
Cash Purchase Price
”), payable on the closing date of the sale of the Equipment and (ii) an unsecured subordinated promissory note for the difference between the value of the Equipment sold and the
Cash Purchase Price (the “
Promissory Note
”). Payments in respect of the Promissory Note will not be made to the Lessees until all other outstanding debt of the SPVs is paid in full.
Simultaneously with the sale of the Equipment, the SPVs will lease back the Equipment to the relevant Lessee or Lessees, as applicable, for 24
months pursuant to the Master Lease Agreement (the “
Equipment Lease
”) in exchange for quarterly rental payments (the “
Equipment Lease Rental Payments
”) to be made by the Lessees to the SPVs. At the end of the
Equipment Lease, the Lessees may elect to return the Equipment to the SPVs or to purchase the Equipment for $1.00. Pursuant to the Guaranty, Sprint will guaranty the Lessees’ obligations under the Sales Agreements to the SPVs and the
Lessees’ obligations under the Equipment Lease to, among other things, make Equipment Lease Rental Payments to the SPVs and termination payments (“
Termination Payments
”) to the SPVs in the event that the Equipment Lease is
terminated early.
To secure the obligations of the Lessees under the Equipment Lease, the Lessees will provide a security interest to the
SPVs in, among other things, the Equipment. The Equipment Sale Leaseback agreements contain affirmative and restrictive covenants customary for transactions of this type. The SPVs will be entitled to terminate one or more Equipment Lease Schedules
upon certain customary enumerated events of default (each, an “
Event of Default
”), including (i) payment default, (ii) failure to comply with covenants, (iii) breach of representations, (iv) insolvency of Sprint
or other affiliates of Sprint and (v) a change of control of Sprint. Upon the occurrence and continuance of an Event of Default and the exercise of remedies by the SPVs, the Lessees will be obligated to pay the Termination Payments. In
addition, the SPVs have entered into an agreement with a third-party providing that the third-party will purchase the Equipment if an Event of Default occurs under the Equipment Lease.
The foregoing description of the Equipment Sale Leaseback is qualified in its entirety by reference to the Form of Sale Agreement, the Master
Lease Agreement and the Guaranty, which are filed as Exhibits 10.1, 10.2 and 10.3 hereto, respectively, and incorporated herein by reference. A copy of the press release issued by Sprint on April 6, 2016 is filed as Exhibit 99.1 and
incorporated by reference.