Welcome!

News Feed Item

Crest Financial Sends Letter to Mount Kellett about Clearwire and Sprint

HOUSTON, Nov. 6, 2012 /PRNewswire-USNewswire/ -- Today, Crest Financial Limited, an investment firm based in Houston, sent a letter to Mount Kellett Capital Management LP regarding issues related to the rights and economic position of the minority shareholders of Clearwire Corporation (NASDAQ: CLWR) in light of Clearwire's relationship with Sprint Nextel Corporation (NYSE: S) and Clearwire's liquidity issues related to the Clearwire's build-out program.

The text of the letter is as follows:

November 6, 2012

VIA FACSIMILE AND COURIER

Mr. Jonathan Fiorello
Chief Operating Officer
Mount Kellett Capital Management LLP
623 Fifth Avenue
18 Floor
New York, New York 10022

Dear Mr. Fiorello:

Crest Financial Limited ("Crest"), a Houston-based investment company, is a long-term investor in Clearwire Corporation (the "Company"). Crest, with its affiliates, currently owns 45,756,898 Class A shares of the Company, or approximately 6.62 percent of the Company's outstanding Class A stock.

We have read the November 1, 2012 letter that you sent to the Company. Crest also has been monitoring the recent developments associated with the Plan of Merger and Agreement ("Merger Agreement") between Sprint Nextel Corporation ("Sprint"), the Company's dominant shareholder, and Softbank Corporation ("Softbank"). It appears that the Softbank-Sprint merger may not be in the Company's best interest and may threaten the interests of the Company's minority shareholders. Your letter expressed many of the concerns we have in this regard, and we commend you for sending it.

By way of background, Crest and its affiliates have a long history of investing in the spectrum that Clearwire currently holds. In 1996, the FCC awarded to Digital & Wireless, a Crest affiliate, licenses providing rights to frequencies in 19 markets in a BTA auction. In June of 2004, Clearwire Corporation, then still a privately-held corporation, acquired these licenses from Digital & Wireless. As part of the consideration for this sale, Crest received a significant number of Clearwire Corporation shares. Since that sale, Crest and its affiliates have continued to purchase shares in Clearwire, thus evidencing our belief in the value of Clearwire's assets and, just as important, Clearwire's business plan for monetizing these assets.

Unfortunately, the Company finds itself with insufficient capital to build out its facilities to realize the full value of the spectrum capacity that it holds. Like you, Crest would expect that, if the members of the Company's Board were intent on discharging their fiduciary duties, they would take immediate action to bolster the Company's liquidity.

In addition to the sale of excess spectrum that you proposed in your letter, Crest believes that immediate steps to raise capital through the offering and sale of additional common shares would be among the steps a board of directors, acting in the best interests of all shareholders, would pursue. Proceeds from such an offering, together with proceeds from the sale of a portion of the Company's excess spectrum to a third party or parties, would ensure a successful build-out of the Company's network and bolster the Company's position as it renegotiates the lease of its spectrum to Sprint. And the additional and immediate network investment facilitated by a successful share offering would likely increase the value of Clearwire's assets and thus the sale price for any excess spectrum.

It is Crest's view that this sale of additional shares can be done quickly and successfully for the good of the Company, its shareholders and the public at large. Indeed, Crest would consider participating in such an offering.

There are a number of reasons why a public offering and sale of shares, in addition to the sale of its excess spectrum, should be pursued. First, the value of the Company's assets, which the Softbank-Sprint proposal and the Company's own disclosures confirm, would easily support such an offering. Second, the proceeds from the sale of shares would provide the Company with the capital necessary to push ahead with its build-out strategy during the period it is working to complete its sale of excess spectrum. Third, raising capital from investors other than the dominant shareholder, or at least pro rata with it, would prevent what has amounted to a creeping tender offer that Sprint has said is its intention with regard to the Company – to wit, the buying of shares of strategic investors whenever it gets a chance. Finally, the Company has recently experienced success in raising capital, specifically through sales of its common shares to the public utilizing its Sales Agreement with Cantor Fitzgerald & Company. There is no reason why these efforts should not continue. Indeed, it is unclear why the Company abruptly ended that arrangement near the end of July notwithstanding the success CF&Co. experienced in selling the Company's common shares under that arrangement.

Crest also is concerned that recent actions (or inactions) of the Company's Board may not be in the best interests of either the Company or its minority shareholders. Like you, we also expect that the members of the Company's Board will continue to perform the fiduciary duties that each owes to the Company and its shareholders. Crest is concerned that Softbank and Sprint are positioning themselves to obtain the exclusive benefit from the Company's valuable spectrum and assets through the Merger Agreement at the expense and to the detriment of the Company and its minority shareholders. While Sprint acquired enough shares to further cement its control of the Company (50.8%) just days after the Merger Agreement was announced, Sprint and Softbank have stated publicly that their transaction "does not require Sprint to take any actions involving Clearwire other than those set forth in agreements Sprint has previously entered into with Clearwire and certain of its shareholders." Odder still is the value placed on the shares purchased by Sprint in that transaction: $2.00 per share of Class A stock and $13.98 per share of Class B stock. The Class A shares were valued at their original price. But the Class B shares received a significant premium; Class B shares were issued at $7.33 per share. We think this higher valuation for the Class B shares is intended to unfairly benefit Class B shareholders and at the expense of Class A shareholders, including Crest and you.

In light of this, Crest believes that compliance with its fiduciary duties under these circumstances would require a properly functioning Board to take a variety of actions to mitigate the danger of Sprint improperly using its status as the controlling shareholder to oppress the rights and economic position of minority shareholders. For example, it could assess the impact on the Company and its public shareholders of the Softbank-Sprint merger as well as subsequent events and public statements, review all other dealings with Sprint, and establish defensive measures to enhance the ability of independent directors to ensure full value for minority shareholders. One area of inquiry could be the Equity holders Agreement of 2008 and, specifically, the standstill agreement that prohibits Sprint from "any direct or indirect acquisition of any Common Stock." The standstill agreement contains an exception to protect minority shareholders—namely, that Sprint can only make an offer for 100 percent of the Company's shares, and only if the offer is approved by independent, unaffiliated members of the Company's Board and by a majority of minority voting shares.

Any or all of these steps would strengthen the Board's ability to prevent any future offer by Sprint to purchase the Company or its assets at a distressed or undervalued price.

From day one, Crest has seen its investment in the Company as a way to facilitate the completion of a world-class network that could challenge the extant duopoly in the wireless communications industry, bring real competition and innovation to the marketplace, and benefit consumers of mobile telecommunications. These goals, which we are sure will be the focus of the Federal Communications Commission's approval process, can be achieved only if the Company's spectrum and assets are managed for the benefit of all stakeholders and not just for shareholders with temporary or untoward advantage and dominance.

We believe that, properly managed, the Softbank-Sprint merger proposal presents an opportunity to benefit not only the interests of all shareholders, but also the public interest. Improperly managed, the merger could harm minority shareholders and the public at large. Crest will continue to monitor the Company's progress and is eager to engage the Company on any relevant matters.

Thank you.

Sincerely yours,

/s/ David K. Schumacher
David K. Schumacher
General Counsel
Crest Financial Limited

SOURCE Crest Financial Limited

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
SYS-CON Events announced today that Loom Systems will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Founded in 2015, Loom Systems delivers an advanced AI solution to predict and prevent problems in the digital business. Loom stands alone in the industry as an AI analysis platform requiring no prior math knowledge from operators, leveraging the existing staff to succeed in the digital era. With offices in S...
With billions of sensors deployed worldwide, the amount of machine-generated data will soon exceed what our networks can handle. But consumers and businesses will expect seamless experiences and real-time responsiveness. What does this mean for IoT devices and the infrastructure that supports them? More of the data will need to be handled at - or closer to - the devices themselves.
DevOps is often described as a combination of technology and culture. Without both, DevOps isn't complete. However, applying the culture to outdated technology is a recipe for disaster; as response times grow and connections between teams are delayed by technology, the culture will die. A Nutanix Enterprise Cloud has many benefits that provide the needed base for a true DevOps paradigm.
My team embarked on building a data lake for our sales and marketing data to better understand customer journeys. This required building a hybrid data pipeline to connect our cloud CRM with the new Hadoop Data Lake. One challenge is that IT was not in a position to provide support until we proved value and marketing did not have the experience, so we embarked on the journey ourselves within the product marketing team for our line of business within Progress. In his session at @BigDataExpo, Sum...
The taxi industry never saw Uber coming. Startups are a threat to incumbents like never before, and a major enabler for startups is that they are instantly “cloud ready.” If innovation moves at the pace of IT, then your company is in trouble. Why? Because your data center will not keep up with frenetic pace AWS, Microsoft and Google are rolling out new capabilities In his session at 20th Cloud Expo, Don Browning, VP of Cloud Architecture at Turner, will posit that disruption is inevitable for c...
SYS-CON Events announced today that Telecom Reseller has been named “Media Sponsor” of SYS-CON's 20th International Cloud Expo, which will take place on June 6–8, 2017, at the Javits Center in New York City, NY. Telecom Reseller reports on Unified Communications, UCaaS, BPaaS for enterprise and SMBs. They report extensively on both customer premises based solutions such as IP-PBX as well as cloud based and hosted platforms.
SYS-CON Events announced today that Ocean9will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Ocean9 provides cloud services for Backup, Disaster Recovery (DRaaS) and instant Innovation, and redefines enterprise infrastructure with its cloud native subscription offerings for mission critical SAP workloads.
Providing the needed data for application development and testing is a huge headache for most organizations. The problems are often the same across companies - speed, quality, cost, and control. Provisioning data can take days or weeks, every time a refresh is required. Using dummy data leads to quality problems. Creating physical copies of large data sets and sending them to distributed teams of developers eats up expensive storage and bandwidth resources. And, all of these copies proliferating...
DevOps is often described as a combination of technology and culture. Without both, DevOps isn't complete. However, applying the culture to outdated technology is a recipe for disaster; as response times grow and connections between teams are delayed by technology, the culture will die. A Nutanix Enterprise Cloud has many benefits that provide the needed base for a true DevOps paradigm. In his Day 3 Keynote at 20th Cloud Expo, Chris Brown, a Solutions Marketing Manager at Nutanix, will explore t...
In recent years, containers have taken the world by storm. Companies of all sizes and industries have realized the massive benefits of containers, such as unprecedented mobility, higher hardware utilization, and increased flexibility and agility; however, many containers today are non-persistent. Containers without persistence miss out on many benefits, and in many cases simply pass the responsibility of persistence onto other infrastructure, adding additional complexity.
SYS-CON Events announced today that Cloudistics, an on-premises cloud computing company, has been named “Bronze Sponsor” of SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Cloudistics delivers a complete public cloud experience with composable on-premises infrastructures to medium and large enterprises. Its software-defined technology natively converges network, storage, compute, virtualization, and management into a ...
SYS-CON Events announced today that CA Technologies has been named “Platinum Sponsor” of SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY, and the 21st International Cloud Expo®, which will take place October 31-November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. CA Technologies helps customers succeed in a future where every business – from apparel to energy – is being rewritten by software. From ...
Pentaho has announced orchestration capabilities that streamline the entire machine learning workflow and enable teams of data scientists, engineers and analysts to train, tune, test and deploy predictive models. Pentaho’s Data Integration and analytics platform ends the ‘gridlock’ associated with machine learning by enabling smooth team collaboration, maximizing limited data science resources and putting predictive models to work on big data faster – regardless of use case, industry, or languag...
SYS-CON Events announced today that T-Mobile will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. As America's Un-carrier, T-Mobile US, Inc., is redefining the way consumers and businesses buy wireless services through leading product and service innovation. The Company's advanced nationwide 4G LTE network delivers outstanding wireless experiences to 67.4 million customers who are unwilling to compromise on ...
SYS-CON Events announced today that SoftLayer, an IBM Company, has been named “Gold Sponsor” of SYS-CON's 18th Cloud Expo, which will take place on June 7-9, 2016, at the Javits Center in New York, New York. SoftLayer, an IBM Company, provides cloud infrastructure as a service from a growing number of data centers and network points of presence around the world. SoftLayer’s customers range from Web startups to global enterprises.