Clearwire, the wireless broadband provider whose investors include Sprint Nextel, Comcast and Time Warner Cable, is considering whether or not to make a $237 million loan payment as it seeks other financing, according to a report by the Wall Street Journal.
The disclosure raises the specter of Clearwire being forced to declare bankruptcy. The company's shares plummeted as much as 31% Friday on the report, before closing at $1.47 per share -- down 21% for the day.
Clearwire had $698 million in cash and short-term investments as of Sept. 30, but the company is also trying to build out its Long Term Evolution 4G capabilities to extend its current WiMax network.
"It's a very expensive payment that we have," Clearwire CEO Erik Prusch said in an interview with the Journal. "It would be a significant drain of our cash, so we have to evaluate everything in terms of our decision of where we're going."
Clearwire has a 30-day grace period after Dec. 1 to make the payment. The company needs an additional $150 million to $300 million to continue its operations, plus approximately $600 million for the LTE upgrade.
Clearwire will run out of cash before the end of 2012 unless it obtains additional funding, according to Standard & Poor's. Last month, Moody's Investor Services downgraded the credit ratings for both Sprint and Clearwire; the ratings firm cited Sprint's hefty investment in the iPhone and its decision to build its own 4G network, and Clearwire's "serious financial challenges."
Then in early November, Sprint provided a ray of hope for Clearwire when it said it may use proceeds from a debt offering for, in part, "the potential funding of Clearwire."
Clearwire has said it is was pursuing "an array of strategic alternatives" for funding with outside parties, including strategic equity investments, sale of wireless-spectrum assets and various forms of debt financing including vendor debt.
Clearwire signed up a record 1.9 million net wholesale subscribers in the third quarter 2011, representing approximately 29% sequential growth, with 9.5 million total subscribers as of the end of the third quarter.
Kirkland, Wash.-based Clearwire is majority owned by Sprint, with investments from Comcast, Time Warner Cable, Bright House Networks, Intel, Google and others. The cable operators have wholesale distribution agreements to offer Clearwire's 4G service under their own brands.