Americas Restructuring: Lumen Technologies’ US$15bn liability management exercise
Lumen shines US-based Lumen Technologies wants to shift from being a telecoms company to a technology company. To do that, it needed time that its looming bond maturities did not afford.
In March, Lumen completed the largest ever liability management exercise tackling US$15bn in debt across 15 tranches, giving the company time to shift its operational strategy and perhaps win over detractors, including a still growing roster of short-sellers.
The transaction pushed out the majority of its maturities by roughly five years with the first of its new notes now due in 2029, offering bondholders better interest rates and at the same time tightening some bond covenants.
Lumen tapped Guggenheim as its investment bank to lead the restructuring of a majority of its bond debt. Houlihan Lokey represented the largest faction of bondholders – an ad hoc group holding roughly US$11bn of debt.
“It was complicated to put the puzzle together,” said Brendan Hayes, senior managing director at Guggenheim. “But we were able to coalesce the creditor body on [a] single-step liability management exercise. It’s the poster child of what you would want any liability management exercise to look like.”
Under the colossal exchange deal, Lumen was able to get US$1.325bn of new money, issuing senior secured first-lien notes at its Level 3 sub. The cash infusion will help fund its transition – an undertaking that will see the company’s capital expenditures soar above US$8bn by some estimates.
The transaction reduced 2025–26 maturities to US$600m from US$2.1bn and reduced 2027 maturities to about US$800m from US$9.5bn.
“We were able to extend the capital structure through discounts without reducing par by extending maturities at below-market rates, which also had tax benefits,” said Ronen Bojmel, senior managing director at Guggenheim.
The transaction was also less aggressive than alternatives – either an in-court Chapter 11 bankruptcy filing or an even more aggressive out-of-court restructuring with the company attempting to strip unencumbered assets away from creditors.
The company was also able to restructure its loan debt, getting 94.4% participation in an exchange offer for the Lumen term loan A-1, 98.5% for the Lumen B term loans and 99.5% for its Level 3 B term loans, creating new super-priority loans for each group.
Lumen also entered a new US$1bn super-priority revolving credit facility at Lumen Tech.
The company said the final transaction achieved participation of holders of more than US$15bn of debt and commitments of the company and its subsidiaries.
Lumen was previously known as CenturyLink. The company adopted its new name in 2020 and is banking on the artificial intelligence boom to power its future. Until then, however, its legacy businesses are haemorrhaging cash, leaving many analysts sceptical that the company can beat the clock even with reset.
The company’s shares, which traded below US$1 before the exchange, soared above US$10 after the transaction and the company began making progress on its turnaround plans providing services to AI players.
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