Sprint Shares Plunge Again On Liquidity Concerns

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Photo: thedarkthing on Flickr

Sprint is trading down another 9% today after falling 20% on Friday.Analysts are concerned that without a major capital infusion, Sprint will run out of money as it upgrades its network.

J.P. Morgan and Deutsche Bank both downgraded the wireless provider to hold ratings from buy.

“While subscriber numbers will likely improve from here driven by the iPhone, we believe that as long as Sprint is burning cash and both it and ecosystem partners need additional capital, it will be tough for the stock to work,” said J.P. Morgan’s Philip Cusick.

“We estimate that Sprint needs to raise $5B of debt during 2012-2013 to fund Network Vision, iPhone subsidies and debt maturities,” said Deutshe Bank’s Brett Feldman. “In our view, this is a key concern for investors as Sprint’s bonds are trading at 10-11%, which implies steep incremental borrowing costs. But, based on our read of Sprint’s credit agreement, we believe it can actually borrow up to $4B of lower-cost secured debt, which we expect to happen in the next 3-6 months.”

Without the capital infusion, UBS estimates cash and cash equivalents on hand will fall from $3.99 billion in 2011 to just $51 million in 2013.  UBS slashed its price target to $2.75 from $4.

Standard & Poors put the company on credit watch for a possible downgrade on “near-term deterioration of profitability and key credit measures in the next few years.”

Other investors laughed at Sprint’s CFO during the Friday meeting >

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