Clearwire: Playing Chicken?
It was Steven Spielberg's directorial debut and involves an unseen trucker taking on a hapless driver in what amounts to a scary, cross-country game of chicken. It's a fun watch if you haven't seen it before.
It also seems to me to be somewhat analogous to Clearwire LLC (Nasdaq: CLWR)'s relationship with its far larger majority owner, Sprint Corp. (NYSE: S), right now. Only in this over-stretched analogy it is not entirely clear to me which party is trying to bump the other off the road.
Case in point, Clearwire is due to make a debt payment of around $235 million on Thursday. As a research note from UBS Investment Bank points out, it easily has the cash on hand to make the payment. Yet, earlier this month, CEO Eric Prusch told The Wall Street Journal that Clearwire might skip the payment because it "would be a significant drain of our cash."
Missing the payment would put the company in default. "We believe going into default is not a step the company wants to take, as even if the default is cured during the [30-day] grace period, the act of defaulting would make it very difficult to secure vendor financing for an LTE build without some kind of concurrent restructuring," the UBS note says.
Yet Clearwire is taking it right down to the wire. Why? I can only speculate that it is some kind of "who blinks first" game with Sprint. Clearwire has made it blatantly clear that it is looking for additional funding from Sprint for its LTE deployment. (See Clearwire Still Looks to Sprint for Funding.)
Seems like a possibly risky power-play, no? I'm sure I'm not seeing all the angles here, and there's probably more to it. Still, with the information I have at hand, that's how it seems.
Let's hope there's no smoking wreck on the road at the end of this particular movie.
— Dan Jones, Site Editor, Light Reading Mobile