Long-Term Debt, Financing and Capital Lease Obligations



	Interest Rates			Maturities			March 31, 2017			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	6,280			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
Revolving bank credit facility	3.50%			2021			—			—
Secured term loan	3.50%			2024			4,000			—
Accounts receivable facility	2.02	-	2.51%	2018			1,964			600
Export Development Canada (EDC)	3.48%			2019			300			550
Secured equipment credit facilities	2.57	-	3.27%	2019	-	2021	431			805
Financing obligations, capital lease and other obligations	2.35	-	10.63%	2017	-	2024	3,016			493
Net premiums and debt financing costs							90			597
							40,914			33,958
Less current portion							(5,036		)	(4,690		)
Long-term debt, financing and capital lease obligations							$	35,878		$	29,268

________


(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 March 31, 2017, Sprint Corporation, the parent corporation, had $10.5 billion in aggregate principal amount of senior notes outstanding. In addition, as of March 31, 2017, 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, secured term loan and secured revolving bank credit facility issued by Sprint Communications, Inc., 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 $26.1 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.

As of March 31, 2017, approximately $13.1 billion aggregate principal amount of our outstanding debt, comprised of certain notes, financing and capital lease obligations, was secured by substantially all of the assets of the Company. Cash interest payments, net of amounts capitalized of $44 million, $51 million, and $56 million, totaled $2.7 billion, $2.4 billion, and $2.3 billion during each of the years ended March 31, 2017, 2016, and 2015, respectively. Our weighted average effective interest rate related to our notes and credit facilities was 6.4% for the years ended March 31, 2017 and 2016, and 6.1% for the year ended March 31, 2015.

Notes

As of March 31, 2017, 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 March 31, 2017, $30.2 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 March 31, 2017, $24.1 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 Clearwire Corporation acquisition on July 9, 2013, 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.

In October 2016, the Company repaid $300 million in aggregate principal of its Clearwire Communications LLC 14.75% secured notes. In December 2016, the Company repaid $2.0 billion aggregate principal upon maturity of its outstanding Sprint Communications, Inc. 6% senior notes. In March 2017, the Company repaid $1.0 billion aggregate principal upon maturity of its outstanding Sprint Communications, Inc. 9.125% senior 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% per annum 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 payments thereafter commencing December 2017 through September 2021. As of March 31, 2017, approximately $438 million of the total principal outstanding was classified as "Current portion of long-term debt, financing and capital lease obligations" 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

Secured Term Loan and Revolving Bank Credit Facility

On February 3, 2017, we entered into a new credit agreement for $6.0 billion, consisting of a $4.0 billion, seven-year secured term loan that matures in February 2024 and a $2.0 billion secured revolving bank credit facility that expires in February 2021. As of March 31, 2017, approximately $215 million in letters of credit were outstanding under this credit facility, including the letter of credit required by the Report and Order (see Note 12. Commitments and Contingencies). As a result of the outstanding letters of credit, which directly reduce the availability of borrowings, the Company had approximately $1.8 billion of borrowing capacity available under the secured revolving bank credit facility as of March 31, 2017. The bank credit facility requires a 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 bank credit facility (adjusted EBITDA), not to exceed 6.0 to 1.0 through the quarter ending December 31, 2017. After December 31, 2017, the Leverage Ratio declines on a scheduled basis until the ratio becomes fixed at 3.5 to 1.0 for the fiscal quarter ended March 31, 2020 and each fiscal quarter ending thereafter through expiration of the facility. The term loan has an interest rate equal to LIBOR plus 250 basis points and the secured revolving bank credit facility has an interest rate equal to LIBOR plus a spread that varies depending on the Leverage Ratio. The secured revolving bank credit facility replaced the $3.3 billion unsecured revolving bank credit facility that was due to expire in February 2018.

In consideration of the seven-year secured term loan, we entered into a five-year fixed-for-floating interest rate swap on a $2.0 billion notional amount that has been designated as a cash flow hedge. The effective portion of changes in fair value are recorded in "Other comprehensive income (loss)" in the consolidated statements of comprehensive loss and the ineffective portion, if any, is recorded in current period earnings in the consolidated statements of operations as interest expense. The fair value of the interest rate swap was approximately $2 million, which was recorded as a liability on the consolidated balance sheets at March 31, 2017.

Accounts Receivable Facility

As of March 31, 2017, the total amount of borrowings under our $4.3 billion Receivable Facility was $2.0 billion and the total amount available to be drawn was $826 million. Prior to the February 2017 amendment, wireless service and installment receivables sold to the Purchasers were treated as a sale of financial assets and Sprint derecognized these receivables and recognized the net proceeds received in cash provided by operating activities in the consolidated statements of cash flows. Subsequent to the February 2017 amendment, the sale of wireless service and installment receivables are reported as financings, which is consistent with our historical treatment for the sale of future lease receivables. During the year ended March 31, 2017, we repaid $416 million to the Purchasers and drew $100 million.

EDC agreement

On February 3, 2017, we amended the EDC agreement to provide for security and covenant terms similar to our secured term loan and revolving bank credit facility. However, under the terms of the EDC agreement repayments of outstanding amounts cannot be redrawn. In March 2017, the Company repaid $250 million of aggregate principal of its outstanding Tranche 4 secured loan due December 15, 2017. As of March 31, 2017, the total principal amount of our borrowings under the EDC facility was $300 million.

Secured equipment credit facilities

Eksportkreditnamnden (EKN)

During the year ended March 31, 2017, we made principal repayments totaling $254 million on the facility, resulting in the total repayment of the principal amount at March 31, 2017. The facility has expired in accordance with its terms.

Finnvera plc (Finnvera)

The Finnvera secured equipment credit facility provides for the ability to borrow up to $800 million to finance network-related purchases from Nokia Solutions and Networks US LLC, USA. The facility 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 year ended March 31, 2017, we made principal repayments totaling $56 million, resulting in a total principal amount of $140 million outstanding at March 31, 2017.

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 year ended March 31, 2017, we made principal repayments totaling $65 million, resulting in a total principal amount of $259 million outstanding at March 31, 2017.

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 March 31, 2017 was $32 million.

Borrowings under the 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. The secured equipment credit facilities have certain key covenants similar to those in our secured term loan and revolving bank credit facility.

Financing Obligations

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 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. The first principal payment of $300 million was made in March 2017 with 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 year ended March 31, 2017, we repaid $654 million to MLS, which reduced the principal amount of the financing obligation to $385 million as of March 31, 2017.

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. The financing obligation as of March 31, 2017 is $191 million.

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, of which the remaining obligation is $225 million as of March 31, 2017. 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 operations 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 of $315 million as of March 31, 2017 are primarily for the use of wireless network equipment.

Covenants

Certain indentures and other agreements also 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 March 31, 2017, 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 secured revolving bank credit facility, 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.

Future Maturities of Long-Term Debt, Financing and Capital Lease Obligations

Aggregate amount of maturities for long-term debt, financing and capital lease obligations outstanding as of March 31, 2017, were as follows (in millions):



Fiscal year 2017	$	5,039
Fiscal year 2018	6,157
Fiscal year 2019	4,168
Fiscal year 2020	2,596
Fiscal year 2021	3,816
Fiscal year 2022 and thereafter	19,048
	40,824
Net premiums and debt financing costs	90
	$	40,914