Standard & Poor’s yesterday put its corporate credit ratings on Clearwire (CLWR) on CreditWatch “with negative implications,” noting that a downgrade is possible.
The ratings firm currently has a B- corporate credit on CLWR.
S&P credit analyst Allyn Arden said in a statement that the move reflects the firm’s view that “Clearwre faces significant near-term liquidity risks.” He notes that the company entered 2010 with $3.8 billion in cash, with expected cash outflow of $3 billion to $3.2 billion, most of that to build its 4G wireless network.
“Given the substantial capital spending requirements and expected operating losses to support the network deployment, we believe that Clearwire’s cash balances may reach dangerously low levels in the first quarter of 2011,” Arden said.
He notes that new financing could come in the form of spectrum sales or debt issuance, but adds that he thinks “ongoing equity infusions” from existing investors – a group which includes Comcast (CMCSA), Sprint (S) and Time Warner Cable (TWC) – “are critical to the long-term sustainability of Clearwire’s business plans.”
The analyst adds that “a downgrade, if any, could exceed one notch.”
CLWR is down 39 cents, or 5.3%, to $7.01.
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