As noted in this story from yesterday, Clearwire's
Clearwire's shareholders obviously didn't like that announcement. The stock price fell off the cliff at 1:52 p.m. Friday, dropping almost 32% within 20 minutes. This caused trading to be halted several times. Clearwire ended up being down more than 21% for the day.
Bad credit where bad credit is due
One credit-ratings agency has also shown its waning confidence in the company as a result of Prusch's admission. Standard & Poor's Ratings Services downgraded Clearwire one step to CCC-, or very poor.
The company has not had a good year. Sprint Nextel
That lack of commitment on Sprint's part has contributed to the steady decline in Clearwire's share price over the past seven months, losing close to 75% of its market value.
Clearwire seems to have enough cash to stay in business for the next year even if it does make that interest payment. But to hang around much longer than that, it needs to upgrade its network, and that, according to the company, will require close to $1 billion. That money is needed to build a 4G LTE network on top of its current 4G WiMAX network. Without that upgrade, it's unlikely it could compete with the likes of AT&T
Even if Clearwire and Sprint can come to a viable understanding, that would not get Clearwire out of the woods. Sprint, too, has been the recipient of a recent credit downgrade. Earlier this month, S&P lowered Sprint's credit rating even deeper into junk-bond territory. And this came two months after Moody's did the same.
Higher loan costs
These downgrades will naturally result in higher interest rates for any borrowing, and there will need to be some borrowing. Sprint has $2.3 billion of debt due next March. Though it does have $4 billion available in liquid assets, the carrier will still need to raise enough to pay for its projected LTE upgrade, and -- if they can come to terms -- any bailout for Clearwire.
In the meantime, while we are waiting for the shoes to drop from the other credit-ratings agencies, keep track of these companies by placing them on your customized version of the Fool's My Watchlist: