Debt backing Lumen Technologies has been active this morning, with its secured debt jumping while its unsecured notes remain volatile on news that the company entered into an amended and restated TSA with a broader group of creditors to extend debt maturities and add $1.325bn of financing at Level 3 alongside an over $1bn revolver to the company.
The agreement includes creditors that represent over $12.5bn out of the company’s $20bn of debt, or over 70% of aggregated Lumen and Level 3 debt maturing through 2027. The TSA will, among other things, extend debt maturities to primarily 2029 and beyond.
The company’s 3.4% first-lien notes due 2027 issued by Level 3 were the most active, with over $65mn moving so far today, changing hands at either side of 99, versus 90 yesterday and last week, according to trade data. Meanwhile, subsidiary Level 3’s term loan due 2027 (S+175, 0% floor) jumped to a 97-97.5 market, up from 94.25-95 yesterday, according to sources.
Most of the debt maturing until 2027 has climbed closer to par on note of the agreement, but investors across the capital structure have also shown optimism on the news with several of the bonds maturing after 2027 also trending higher, sources added. The issuer’s 3.625% senior notes due 2029 climbed as well, but still at distressed levels, quoted at 52.25-53, versus 35.5-36.5 going out last week, sources noted.
The new agreement will allow term loan holders to participate, with Lumen noting that more than 70% of the holders of Level 3’s debt maturing through 2027 have agreed to the proposal. The deal is expected to close in the first quarter. Details follow:
The 8-K reads as follows:
| Item 1.01 | Entry into a Material Definitive Agreement. |
As previously announced, on October 31, 2023, Lumen Technologies, Inc. (the “ Company” or “Lumen”) entered into a Transaction Support Agreement (the “Original Transaction Support Agreement”) with (i) Level 3 Financing, Inc. (“Level 3”), (ii) Qwest Corporation (“Qwest”, together with the Company and Level 3, the “Company Parties”), and (iii) certain holders of the debt of the Company and Level 3 (the “Original TSA Parties”). On January 22, 2024, the Company, Level 3, Qwest, the Original TSA Parties and certain other holders of the debt of the Company and Level 3 (such holders, together with the Original TSA Parties, the “Consenting Parties” and the Consenting Parties, together with the Company Parties, the “Parties”) entered into an Amended and Restated Transaction Support Agreement (together with all exhibits, annexes and schedules thereto, the “A&R Transaction Support Agreement”).
The A&R Transaction Support Agreement, which amends and restates in its entirety the Original Transaction Support Agreement, defines the Parties’ commitments to effect a series of transactions (the “TSA Transactions”) set forth in the term sheet attached thereto (the “Term Sheet”), which transactions will provide the Company and Level 3 with comprehensive maturity extensions while allowing them to maintain sufficient operating liquidity and financial flexibility. Among other things and subject to the terms and conditions set forth therein, the A&R Transaction Support Agreement, including the Term Sheet, contemplates:
| • | the incurrence by Level 3 of $1.325 billion in new money long term senior secured first lien indebtedness, which indebtedness will be backstopped by certain of the Consenting Parties; |
| • | a new revolving credit facility at Lumen in an amount expected to be approximately $1 billion; |
| • | the extension of maturities, covenant modifications and rate increases of certain secured and unsecured indebtedness at the Company and Level 3 through a series of exchanges and other debt transactions with certain Consenting Parties as set forth in the Term Sheet; and |
| • | the repayment of certain indebtedness at the Company and Qwest. |
In addition, the A&R Transaction Support Agreement makes certain modifications to the TSA Trasactions set forth in the Term Sheet and extends the outside date for completion of the TSA Transactions to Feburary 29, 2024, which the Company may unilaterally extend at its discretion to March 31, 2024. The Company expects to consummate the TSA Transactions in the first quarter of 2024, subject to the satisfaction of limited remaining closing conditions.The Company plans to make certain term loan transactions available to all holders in connection with the consummation of such transactions. The transactions related to certain notes of the Company and Level 3 will be executed on a privately negotiated basis under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). The Company does not plan to make such transactions available to all holders in connection with the consummation of such transactions. Following consummation of the TSA Transactions, the Company may assess potential follow-on transactions with respect to non-participating debt.
The A&R Transaction Support Agreement also contains certain representations, warranties and other agreements by the Parties. The representations, warranties and covenants of each Party set forth in the A&R Transaction Support Agreement have been made only for purposes of, and were and are solely for the benefit of, the Parties and may be subject to limitations agreed upon by the Parties. In addition, certain representations and warranties were made only as of the date of the A&R Transaction Support Agreement or such other date as is specified therein. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the A&R Transaction Support Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures. Accordingly, the A&R Transaction Support Agreement has been included with this filing only to provide investors with information regarding the terms of the A&R Transaction Support Agreement, and not to provide investors with any other factual information regarding the Parties, their respective affiliates or their respective businesses.
The company’s statement reads as follows:
New Agreement with Creditors to Provide Company with Significant Financial Flexibility
DENVER, Jan. 25, 2024 /PRNewswire/ — Lumen Technologies, Inc. (NYSE: LUMN) (“Lumen” or the “Company”) today announced that it has entered into an amended and restated transaction support agreement (the “TSA”) with a broadened group of creditors who now represent, in the aggregate, over $12.5 billion of the outstanding indebtedness and commitments of the Company and its subsidiaries and represent over 70% in the aggregate of Lumen and Level 3 debt maturing through 2027. The amended TSA announced today is supported by a significantly larger group of creditors across more of Lumen’s capital structure than the agreement previously announced on October 31, 2023. The TSA will, among other things, extend debt maturities to primarily 2029 and beyond, provide $1.325 billion of financing to the Company through new long-term debt and provide access to a new revolving credit facility in an amount expected to be approximately $1 billion. Lumen expects to complete the transactions contemplated by the TSA in the first quarter of 2024, subject to the satisfaction of limited remaining closing conditions. The broad support across the Company’s capital structure demonstrates creditors’ and stakeholders’ conviction in Lumen’s turnaround plan and growth strategy.
“This agreement represents another positive step forward in the Lumen turnaround story and creates substantial runway for the Company to achieve its financial and capital structure goals. The TSA transactions, when completed, will provide Lumen significant flexibility as we continue to execute on our transformation journey of disrupting telecom,” commented Kate Johnson, President and Chief Executive Officer of Lumen.
Lumen plans to make certain term loan transactions available to all holders in connection with the consummation of such transactions. The transactions related to certain notes of the Company and Level 3 will be executed on a privately negotiated basis under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). The Company does not plan to make such transactions available to all holders in connection with the consummation of such transactions. Following consummation of the TSA transactions, Lumen may assess potential follow-on transactions with respect to non-participating debt.
Additional information can be found in the Company’s Current Report on Form 8-K filed with the SEC today and available on Lumen’s investor relations website at https://ir.lumen.com.
Guggenheim Securities, LLC served as financial advisor and Wachtell, Lipton, Rosen & Katz served as legal advisor to the Company.
Peter Agra
LevFin Insights
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