Stressed Out: Sprint Dashes Up After Adding $2 Billion to Liquidity Pool

 | Jan 26, 2016 | 10:15 AM EST
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This article is part of a Real Money series on 20 companies investors should consider adding to their distressed watch list.

Sprint's (S) liquidity pool just got a little bit deeper, and shareholders are, by now, well aware that the debt-laden telecom giant badly needs it.

It's one of the reasons Sprint shares are up 12% in morning trading. As Real Money reported, Sprint has serious debt problems, and has been burning cash rapidly. (Sprint posted only $2 billion of cash in its last reported quarter, down 72% since the end of 2013.) Meanwhile its debt has been stubbornly rising, at $34 billion last quarter, and earnings have been negative for a year and a half.

It's an ugly network of problems.

But on Tuesday's earnings call, Sprint CEO Marcelo Claure announced that Sprint has managed to net about $1.1 billion in cash from a sale-leaseback transaction, in addition to widening the line of credit available on its credit facility by $1 billion -- to $4.3 billion. This deeper liquidity pool should help provide the telecom giant more time to turn things around (or at least a longer runway to burn cash).

Sprint's earnings call for the fiscal third quarter beat analyst estimates by 20%, based on Bloomberg consensus data. And while an operating loss of $197 million drove earnings per share into negative territory -- at a $0.21 loss -- it nonetheless beating Wall Street's dire forecasts.

Sprint pointed to its increased subscription base for earnings growth, although sales of $8.1 billion missed expectations by nearly 2%.

Sprint also touted $800 million in fiscal year-to-date cost savings, and lifted its forecast for fiscal-year EBITDA (earnings before interest, taxes, depreciation and amortization) by 13% -- to a range of $7.7 billion to $8 billion.

"As you can see reflected in our third-quarter results, we have 491,000 total net additions in the quarter, which brings us to over 2 million total net additions year to date, as continued progress in postpaid has offset the pressures of the prepaid business," Claure said.

"Our customers are experiencing a network that is faster than the competition, and there has never been a better time to give Sprint a try. We're so proud of our LTE Plus network that we launched a promotion offering 50% off the price of most Verizon (VZ), AT&T (T), and T-Mobile (TMUS) rate plans during the biggest switching period of the year to invite more customers to come try Sprint." 

For more on Real Money's 20 distressed companies to watch:

Stressed Out: 5 Steelmakers to Put on Your Distressed Watch List

Stressed Out: Introducing Real Money's Distressed Index

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with the market getting a bit frothy here, we'll add some put protection. this is 2X normal size BOUGHT SPY...

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