By Devika Krishna Kumar
(Reuters) - Sprint Corp (N:S) said it would raise about $1.1 billion in cash through a sale and lease-back deal with a company whose backers include Japan's SoftBank Group Corp (T:9984), the U.S. telecom company's majority owner.
Citing the deal, Sprint cut its full-year adjusted EBITDA forecast to $6.8 billion-$7.1 billion from $7.2 billion-$7.6 billion.
The company now expects an operating loss of $50 million-$250 million for the year, compared with a profit of $200 million-$500 million forecast earlier, CFO Tarek Robbiati said on a conference call.
Sprint's shares fell as much as 6.2 percent to $3.80 in late morning trading on Friday.
The lease-back deal is aimed at reducing costs resulting from a switch to new financing plans for phones that allow monthly payments from traditional two-year contracts.
The new plans are delaying money coming into Sprint for phone payments and has led to a cash burn as the company needs to make upfront payments to phonemakers.
"It was critical that they get the deal done ... but it is smaller than investors would have hoped for," said Craig Moffett, an analyst at MoffettNathanson LLC.
"Coupled with their recent 50 percent off price cut, it's not really enough to stop the bleeding."
Sprint said on Wednesday customers who switch to its network from Verizon, AT&T (N:T) and T-Mobile will have to pay only half of what they pay for their existing plans.
Investors have worried that Sprint, which is locked in an aggressive battle for subscribers, has been burning cash at an alarming rate.
Sprint's total liabilities stood at $59.69 billion as of Sept. 30, while cash and cash equivalents were $1.97 billion.
Earlier this month, Sprint said it aimed to slash fiscal 2016 expenses by as much as $2.5 billion through cost cuts, including layoffs.
SoftBank, which owns more than 80 percent of the Sprint, said in August it was not looking to sell its stake and would instead set up two financing vehicles to help the carrier finance its leasing payments and network upgrades.
Sprint said on Friday the cost of the funding was well below alternatives in the high-yield debt market.
Funding for the deal with Mobile Leasing Solutions (MLS), the company formed by SoftBank and other investors, would come from several lenders including international banks and leasing companies.
Sprint said it expects to sell 2.5 million leased devices with an estimated book value of $1.3 billion to MLS.