Clearwire 2008 Annual Report Download - page 104

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As t
h
e Transact
i
ons c
l
ose
d
on Novem
b
er 28, 2008, t
h
ea
ll
ocat
i
on o
f
purc
h
ase cons
id
erat
i
on
i
s pre
li
m
i
nary an
d
b
ase
d
on va
l
uat
i
ons
d
er
i
ve
df
rom est
i
mate
df
a
i
rva
l
ue assessments an
d
assumpt
i
ons. T
h
e
fi
na
l
purc
h
ase pr
i
c
e
allocation is pendin
g
the finalization of appraisal valuations of certain tan
g
ible and intan
g
ible assets acquired.
Whil
e management
b
e
li
eves t
h
at
i
ts pre
li
m
i
nary est
i
mates an
d
assumpt
i
ons un
d
er
l
y
i
ng t
h
eva
l
uat
i
ons are reason-
a
bl
e,
diff
erent est
i
mates an
d
assumpt
i
ons cou
ld
resu
l
t
i
n
diff
erent va
l
ues ass
i
gne
d
to
i
n
di
v
id
ua
l
assets acqu
i
re
d
an
d
liabilities assumed, and the resultin
g
amount of the excess of fair value of net assets acquired over the purchas
e
p
rice.
T
ransaction Re
l
ate
d
Ex
p
ense
s
B
efore the Closin
g
, Sprint leased spectrum to Old Clearwire throu
g
h various spectrum lease a
g
reements. As
p
art of the Transactions, Sprint contributed both the spectrum lease a
g
reements and the spectrum assets underl
y
in
g
th
ose agreements to our
b
us
i
ness. As a resu
l
to
f
t
h
e Transact
i
ons, t
h
e spectrum
l
ease agreements are e
ff
ect
i
ve
ly
t
erminated, and the settlement of those a
g
reements is accounted for as a separate element apart from the busines
s
c
ombination. The settlement
g
ain or loss to be reco
g
nized from the termination is valued based on the amount b
y
whi
c
h
t
h
e agreements are
f
avora
bl
eorun
f
avora
bl
e to our
b
us
i
ness re
l
at
i
ve to current mar
k
et rates. T
h
e spectrum
lease a
g
reements are considered to be unfavorable to our business b
y
approximatel
y
$80.6 million on a net basis. A
s
s
uch, we reduced the purchase consideration paid and recorded a non-recurrin
g
expense of approximatel
y
$
80.6 million, which is included in transaction related expenses, related to the settlement of the unfavorabl
e
s
pectrum
l
ease a
g
reements
i
n connect
i
on w
i
t
h
t
h
e Transact
i
ons.
C
ommercia
l
A
g
reements
At the Closing, Clearwire entered into several commercial agreements with Sprint and certain of the Investors
r
e
l
at
i
n
g
to, amon
g
ot
h
er t
hi
n
g
s, t
h
e
f
o
ll
ow
i
n
g
:
• Resa
l
e agreements among C
l
earw
i
re, Spr
i
nt an
d
certa
i
n Investors an
d
most
f
avore
d
rese
ll
er status
f
or certa
in
s
erv
i
ce a
g
reements
;
•Deve
l
opment o
f
new 4G w
i
re
l
ess commun
i
cat
i
ons serv
i
ces an
d
t
h
e creat
i
on o
fd
es
k
top an
d
mo
bil
e
a
pp
lications for our network
;
•T
h
eem
b
e
ddi
ng o
f
W
i
MAX c
hi
ps
i
nto var
i
ous networ
kd
ev
i
ces; an
d
• Other infrastructure agreements.
B
ased on our assessment of these a
g
reements, no separate asset, liabilit
y
, revenue or expense has been recorde
d
i
n the financial statements to reflect the nature and terms of the commercial agreements
.
S
p
rint Pre-C
l
osing Financing an
d
Amen
d
e
d
Cre
d
it Agreement
As part of the Closin
g
, we assumed a $1.19 billion, senior secured term loan facilit
y
, net of debt discount, from
O
ld Clearwire, which we refer to as the Senior Term Loan Facility. The Senior Term Loan Facility retains the term
s
an
d
con
di
t
i
ons as set
f
ort
hi
nt
h
e Amen
d
e
d
an
d
Restate
d
Cre
di
tA
g
reement,
d
ate
d
as o
f
Novem
b
er 21, 2008, w
hi
c
h
w
ere
f
er to as t
h
e Amen
d
e
d
Cre
di
tA
g
reement. T
h
e Sen
i
or Term Loan Fac
ili
t
y
requ
i
res quarter
ly
pa
y
ments
i
nt
h
e
amount equal to 1.00% of the ori
g
inal principal amount of the term loans prior to the maturit
y
date, with th
e
r
ema
i
n
i
ng
b
a
l
ance
d
ue on May 28, 2011
.
We also assumed the liability to reimburse Sprint for financing the operations of our business between April 1,
2
008 and Closing, which we refer to as the Sprint Pre-Closing Financing Amount. We were required to reimburse
S
print $392.2 million in total, of which we were required to pa
y
$213.0 million, plus related interest of $4.5 million,
i
n cash to Sprint on the first business da
y
after the Closin
g
. The remainin
g
unpaid Sprint Pre-Closin
g
Financin
g
A
mount was treated as an additional tranche of the term loan, which we refer to as the S
p
rint Tranche, under th
e
A
mended Credit A
g
reement in the amount of
$
179.2 million
.
9
2
C
LEARWIRE
CO
RP
O
RATI
O
N AND
SU
B
S
IDIARIE
S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)