Send me real-time posts from this site at my email

​12%-13% Yield on Sprint High-Yield Bonds: Value or Signs of Trouble?

Sprint is a company that has largely been falling off track the past couple years. After reaching an intra-day high of $10.79 per share on December 27, 2013, the stock now sits at just $3.71. The company’s cash burn has accelerated as it attempts to hold up against the competitive threats of large-scale telecom conglomerates AT&T, Verizon, and T-Mobile. Sprint spent $1.5 billion in cash from 03/31/15-03/31/16, with current assets declining 30%.

While Sprint has added customers this year as it seeks to regain market share, four tranches of its subordinated debt now yield 12%-13%, with another yielding 11.55%. With bond yields in many countries at effectively zero or even negative, 12%-13% is a massive yield in today’s world. Anything above 7% yield for a bond typically entails a huge assumption of risk in today's low-rate environment. For those who realistically believe in the health of the company over the next 5-6 years, the 12%-13% yield looks extremely attractive. Nonetheless, the fact that the company is seeing that kind of yield on its subdebt suggests that many investors are not feeling confident in the company’s mid- and long-term prospects.

(Source: Morningstar)

Welcome! Is it your First time here?

What are you looking for? Select your points of interest to improve your first-time experience:

Apply & Continue