Long-Term Debt, Financing and Capital Lease Obligations



	Interest Rates			Maturities			December 31, 2016			March 31, 2016
							(in millions)
Notes
Senior notes
Sprint Corporation	7.13	-	7.88%	2021	-	2025	$	10,500		$	10,500
Sprint Communications, Inc.	6.00	-	11.50%	2017	-	2022	7,280			9,280
Sprint Capital Corporation	6.88	-	8.75%	2019	-	2032	6,204			6,204
Senior secured notes
Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC, Sprint Spectrum Co III LLC	3.36%			2021			3,500			—
Guaranteed notes
Sprint Communications, Inc.	7.00	-	9.00%	2018	-	2020	4,000			4,000
Secured notes
Clearwire Communications LLC ⁽¹⁾	14.75%			2016			—			300
Exchangeable notes
Clearwire Communications LLC ⁽¹⁾⁽²⁾	8.25%			2017			629			629
Credit facilities
Bank credit facility	4.00%			2018			—			—
Export Development Canada (EDC)	4.48	-	6.23%	2017	-	2019	550			550
Secured equipment credit facilities	2.03	-	3.27%	2017	-	2021	586			805
Financing obligations, capital lease and other obligations	2.35	-	10.63%	2017	-	2024	3,881			1,093
Net premiums and debt financing costs							183			597
							37,313			33,958
Less current portion							(6,554		)	(4,690		)
Long-term debt, financing and capital lease obligations							$	30,759		$	29,268

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(1) Notes of Clearwire Communications LLC are also direct obligations of Clearwire Finance, Inc. and are guaranteed by certain Clearwire subsidiaries.

(2) The $629 million Clearwire 8.25% Exchangeable Notes have both a par call and put on December 1, 2017 resulting in the balance

being classified as a current debt obligation as of December 31, 2016.

As of December 31, 2016, Sprint Corporation, the parent corporation, had $10.5 billion in aggregate principal amount of senior notes outstanding. In addition, as of December 31, 2016, the outstanding principal amount of senior notes issued by Sprint Communications, Inc. and Sprint Capital Corporation, guaranteed notes issued by Sprint Communications, Inc., exchangeable notes issued by Clearwire Communications LLC, the EDC agreement, the secured equipment credit facilities, the installment payment obligations, and the Network Equipment Sale-Leaseback and Handset Sale-Leaseback Tranche 2 financing obligations, collectively totaled $22.3 billion in principal amount of our long-term debt issued by 100% owned subsidiaries, was fully and unconditionally guaranteed by Sprint Corporation. Although certain financing agreements restrict the ability of Sprint Communications, Inc. and its subsidiaries to distribute cash to Sprint Corporation, the ability of the subsidiaries to distribute cash to their respective parents, including to Sprint Communications, Inc., is generally not restricted.

Cash interest payments, net of amounts capitalized of $32 million and $40 million, totaled $1.9 billion and $1.8 billion during the nine-month periods ended December 31, 2016 and 2015, respectively.

Notes

As of December 31, 2016, our outstanding notes consisted of senior notes, guaranteed notes, and exchangeable notes, all of which are unsecured, as well as senior secured notes associated with our Spectrum Financing transaction. Cash interest on all of the notes is generally payable semi-annually in arrears with the exception of the Spectrum Financing senior secured notes, which are payable quarterly. As of December 31, 2016, $31.3 billion aggregate principal amount of the notes was redeemable at the Company's discretion at the then-applicable redemption prices plus accrued interest.

As of December 31, 2016, $25.1 billion aggregate principal amount of our senior notes and guaranteed notes provided holders with the right to require us to repurchase the notes if a change of control triggering event (as defined in the applicable indentures and supplemental indentures) occurs.

Upon the close of the acquisition of Clearwire Corporation (Clearwire Acquisition), the Clearwire Communications LLC 8.25% Exchangeable Notes due 2040 became exchangeable at any time, at the holder’s option, for a fixed amount of cash equal to $706.21 for each $1,000 principal amount of notes surrendered. On December 1, 2017 the Exchangeable Notes can be tendered at the holder’s option for 100% of the par value plus accrued interest resulting in the entire balance being classified as a current debt obligation as of December 31, 2016.

During the three-month period ended December 31, 2016, the Company repaid $2.0 billion aggregate principal upon maturity of its outstanding Sprint Communications, Inc. 6% senior notes and $300 million in aggregate principal of its Clearwire Communications LLC 14.75% secured notes.

In October 2016, Sprint transferred the Spectrum Portfolio to the Spectrum Financing SPEs. The Spectrum Portfolio, which represents approximately 14% of Sprint's total spectrum holdings on a MHz-pops basis, was used as collateral to raise an initial $3.5 billion in senior secured notes at 3.36% from external investors under a $7.0 billion program. Sprint can utilize this financing structure to potentially raise up to an additional $3.5 billion, subject to certain conditions. The notes will be repaid over a five-year term, with interest only payments over the first four quarters and amortizing quarterly principal and interest payments thereafter through September 2021. As of December 31, 2016, approximately $219 million of the total principal outstanding was classified as "Current portion of long-term debt" in the consolidated balance sheets. Total debt finance costs incurred and capitalized in connection with the issuance of notes were approximately $95 million.

Credit Facilities

Unsecured Financing Facility

During the three-month period ended June 30, 2016, Sprint Communications entered into an unsecured financing facility for $2.5 billion. In October 2016, this facility was terminated as a result of entering into the Spectrum Financing transaction described in Note 3. Funding Sources. During the three and nine-months periods ended December 31, 2016, the company recognized the remaining debt finance costs of $74 million associated with the terminated unsecured financing facility, which is included in "Other (expense) income, net" on the consolidated statements of comprehensive loss.

Bank Credit Facility

The Company has a $3.3 billion unsecured revolving bank credit facility that expires in February 2018. Borrowings under the revolving bank credit facility bear interest at a rate equal to LIBOR plus a spread that varies depending on the Company’s credit ratings. As of December 31, 2016, approximately $274 million in letters of credit were outstanding under this credit facility, including the letter of credit required by the Report and Order (see Note 11. Commitments and Contingencies). As a result of the outstanding letters of credit, which directly reduce the availability of borrowings, the Company had approximately $3.0 billion of borrowing capacity available under the revolving bank credit facility as of December 31, 2016. The required ratio (Leverage Ratio) of total indebtedness to trailing four quarters earnings before interest, taxes, depreciation and amortization and other non-recurring items, as defined by the credit facility (adjusted EBITDA), may not exceed 6.25 to 1.0 through the quarter ending December 31, 2016 and 6.0 to 1.0 each fiscal quarter ending thereafter through expiration of the facility. The facility allows us to reduce our total indebtedness for purposes of calculating the Leverage Ratio by subtracting from total indebtedness the amount of any cash contributed into a segregated reserve account, provided that, after such cash contribution, our cash remaining on hand for operations exceeds $2.0 billion. Upon transfer, the cash contribution will remain restricted until and to the extent it is no longer required for the Leverage Ratio to remain in compliance.

EDC Agreement

As of December 31, 2016, the unsecured EDC agreement provided for covenant terms similar to those of the unsecured revolving bank credit facility. However, under the terms of the EDC agreement, repayments of outstanding amounts cannot be re-drawn. As of December 31, 2016, the total principal amount of our borrowings under the EDC facility was $550 million. On February 3, 2017, we amended the EDC agreement to provide for security and covenant terms similar to our new secured term loan and revolving bank credit facility.

Secured Equipment Credit Facilities

Eksportkreditnamnden (EKN)

In 2013, we had fully drawn and began to repay the EKN secured equipment credit facility totaling $1.0 billion, which was used to finance certain network-related purchases from Ericsson. During the nine-month period ended December 31, 2016, we made principal repayments totaling $127 million on the facility, resulting in a total principal amount of $127 million outstanding at December 31, 2016.

Finnvera plc (Finnvera)

The Finnvera secured equipment credit facility provides us with the ability to borrow up to $800 million to finance network-related purchases from Nokia Solutions and Networks US LLC, USA. The facility, which initially could be drawn upon as many as three consecutive tranches, now has one tranche remaining and available for borrowing through October 2017. Such borrowings are contingent upon the amount and timing of Sprint's network-related purchases. During the nine-month period ended December 31, 2016, we made principal repayments totaling $28 million on the facility, resulting in a total principal amount of $168 million outstanding at December 31, 2016.

K-sure

The K-sure secured equipment credit facility provides for the ability to borrow up to $750 million to finance network-related purchases from Samsung Telecommunications America, LLC. The facility can be divided in up to three consecutive tranches of varying size with borrowings available until May 2018, contingent upon the amount of network-related purchases made by Sprint. During the nine-month period ended December 31, 2016, we made principal repayments totaling $65 million on the facility, resulting in a total principal amount of $258 million outstanding at December 31, 2016.

Delcredere | Ducroire (D/D)

The D/D secured equipment credit facility provides for the ability to borrow up to $250 million to finance network equipment-related purchases from Alcatel-Lucent USA Inc. The principal balance outstanding at December 31, 2016 was $32 million.

Borrowings under the EKN, Finnvera, K-sure and D/D secured equipment credit facilities are each secured by liens on the respective equipment purchased pursuant to each facility's credit agreement. In addition, repayments of outstanding amounts borrowed under the secured equipment credit facilities cannot be redrawn. Each of these facilities is fully and unconditionally guaranteed by both Sprint Communications, Inc. and Sprint Corporation. As of February 3, 2017, the secured equipment credit facilities have certain key covenants similar to those in our new secured term loan and revolving bank credit facility.

Financing Obligations

Financing of Future Lease Receivables

In the three-month period ended March 31, 2016, we sold approximately $1.2 billion in total of future amounts due from customers who lease certain devices from us in exchange for cash proceeds of $600 million through our Receivables Facility (see Note 3. Funding Sources). The difference between the amount sold and the cash received represents additional collateral to the lenders. The sale was accounted for as a financing and the $600 million cash proceeds were, accordingly, reflected as debt in our consolidated balance sheets. The associated leased devices continue to be reported as part of our "Property, plant and equipment, net" in our consolidated balance sheets and continue to be depreciated over their estimated useful life.

During the nine-month period ended December 31, 2016, we repaid $153 million to the Purchasers, which reduced the principal amount outstanding to $447 million as of December 31, 2016.

Network Equipment Sale-Leaseback

In April 2016, Sprint sold and leased back certain network equipment to Network LeaseCo. The network equipment acquired by Network LeaseCo, which is consolidated by us, was used by them as collateral to raise approximately $2.2 billion in borrowings from external investors, including SoftBank. Principal and interest payments on the borrowings from the external investors will be repaid in staggered, unequal payments through January 2018 with the first principal payment of approximately $300 million due in March 2017 followed by the remaining $1.9 billion of principal payments due in fiscal year 2017 (see Note 3. Funding Sources).

Handset Sale-Leaseback Tranche 2

In May 2016, Sprint entered into a second transaction with MLS to sell and leaseback certain iPhone^®devices leased by our customers. Upon the transfer of devices with a net book value of approximately $1.3 billion to MLS, Sprint received cash proceeds of $1.1 billion. Unlike Tranche 1, the proceeds from Tranche 2 were accounted for as a financing (see Note 3. Funding Sources). During the nine-month period ended December 31, 2016, we repaid $502 million to MLS, which reduced the principal amount of the financing obligation to $554 million as of December 31, 2016.

Tower Financing

We have approximately 3,000 cell sites that we sold and subsequently leased back during 2008. Terms extend through 2021, with renewal options for an additional 20 years. These cell sites continue to be reported as part of our "Property, plant and equipment, net" in our consolidated balance sheets due to our continued involvement with the property sold and the transaction is accounted for as a financing.

Capital Lease and Other Obligations

On August 10, 2015, Shenandoah Telecommunications Company (Shentel) entered into a definitive agreement to acquire one of our wholesale partners, NTELOS Holdings Corp (nTelos). In connection with this definitive agreement, we entered into a series of agreements with Shentel to, among other things, acquire certain assets such as spectrum, terminate our existing wholesale arrangement with nTelos, and amend our existing affiliate agreement with Shentel to primarily include the subscribers formerly under the wholesale arrangement with nTelos. The agreements also expanded the area in which Shentel provides wireless service to Sprint customers and provided for more favorable economic terms. In April 2016, we received regulatory approval and the transaction closed in May 2016. The total consideration for this transaction included $181 million, on a net present value basis, of notes payable to Shentel. Sprint will satisfy its obligations under the notes payable over an expected term of five to six years. FCC licenses acquired from Shentel had a total value of $85 million. $96 million of the total purchase was recorded in “Other, net” in the consolidated statements of comprehensive loss as a contract termination in the quarter ended June 30, 2016, which related to the termination of our pre-existing wholesale arrangement with nTelos. The remainder of our capital lease and other obligations are primarily for the use of wireless network equipment.

Covenants

Certain indentures and other agreements require compliance with various covenants, including covenants that limit the ability of the Company and its subsidiaries to sell all or substantially all of its assets, limit the ability of the Company and its subsidiaries to incur indebtedness and liens, and require that we maintain certain financial ratios, each as defined by the terms of the indentures, supplemental indentures and financing arrangements.

As of December 31, 2016, the Company was in compliance with all restrictive and financial covenants associated with its borrowings. A default under any of our borrowings could trigger defaults under certain of our other debt obligations, which in turn could result in the maturities being accelerated.

Under our revolving bank credit facility and certain other agreements, we are currently restricted from paying cash dividends because our ratio of total indebtedness to adjusted EBITDA (each as defined in the applicable agreements) exceeds 2.5 to 1.0.