Credit-default swaps on Sprint Nextel Corp. jumped to the highest in more than two months after Moody’s Investors Service said yesterday it’s reviewing whether to cut its rating on the third-largest U.S. mobile phone carrier. They rose 9.2 basis points to 398.5, according to CMA.
Moody’s, which ranks the Overland Park, Kansas, company Ba2, cited “weak, albeit slowly improving, operating performance combined with a further deterioration in its relationship” with Clearwire, according to a statement yesterday.
Sprint has a 54 percent stake in Kirkland, Washington-based wireless broadband operator Clearwire, which said Nov. 4 that it didn’t have enough funding to keep operating, prompting investor concern that a default could trigger a contract provision pulling Sprint into default too.
Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.