A group of Lumen Technologies Inc. creditors has hired Davis Polk & Wardwell to analyze its debt covenants and start talks with the company, according to people with knowledge of the situation.
(Bloomberg) — A group of Lumen Technologies Inc. creditors has hired Davis Polk & Wardwell to analyze its debt covenants and start talks with the company, according to people with knowledge of the situation.
Some lenders holding bonds and loans tied to Level 3 Communications had already tapped Houlihan Lokey Inc. for advice on how proceeds were used from an asset sale last year, Bloomberg reported. Since then more creditors, including those to Lumen, have joined the group, said the people, who asked not to be identified because the matter is private.
The creditors want to know how the telecommunications company used proceeds from the sale of Latin American assets in August 2022 and whether any of the cash repaid unsecured bonds that rank lower in the line for repayment, said the people.
Such a move, if it occurred, may have breached covenants, they added.
“We are well aware of the obligations contained in our credit instruments,” a Lumen spokesperson said in an emailed statement. “We believe any suggestions of non-compliance are unfounded and driven by parties looking to create uncertainty for their own advantage.”
Messages left with Davis Polk were not returned, while a representative for Houlihan declined to comment.
Lumen, based in Monroe, Louisiana, has some $20 billion of long-term debt, much of it stemming from a series of acquisitions, including the purchase of Level 3 for $34 billion in 2017. The company was previously known as CenturyLink, but took on the Lumen name in 2020.
More than $7 billion of Lumen’s debt trades at distressed levels, according to data compiled by Bloomberg. The company’s roughly $4 billion term loan due 2027 trades around 73 cents on the dollar, Bloomberg data show.
The company completed a debt swap earlier this year that saw it exchange a series of Lumen bonds for new 10.5% Level 3 secured notes due 2030. Since then, investors have grown concerned that the company could raise more secured debt through the Level 3 unit, which would potentially hurt their recoveries, Bloomberg reported.
–With assistance from Sridhar Natarajan.
(Updates with additional context throughout.)
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