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Bond Market News
Lumen Technologies Upgraded to CCC+ by S&P
October 9, 2024
Lumen Technologies was upgraded to CCC+ from SD by S&P. The upgrade reflects reduction of debt and extension of maturities following debt exchange transactions. Also, it reflects improved liquidity due to the recent contract wins with hyperscalers. Lumen Technologies has secured $5bn in new business to address rising demand for AI connectivity, notably partnering with Microsoft. The company is also in talks for an additional $7bn in sales opportunities, which could aid in repairing its balance sheet over several years, contingent on successful execution. These contracts will involve Indefeasible Rights Of Use (IRUs) lasting an average of 20 years, with upfront cash payments of about $5bn expected over the next five years to fund operating expenses and capital expenditures. Although Lumen’s liquidity position has improved, its credit metrics are expected to worsen through 2025 due to elevated leverage and ongoing challenges, according to S&P. It predicts Lumen’s debt-to-EBITDA to reach ~5.2x in 2024 and 5.6x in 2025, with a potential decline to the low-5x range by 2026 if execution is strong. Moody’s had upgraded Lumen to Caa1, earlier in August, citing new order wins.
Lumen’s bonds traded stable with its 4% 2027s at 88, yielding 9.85%.
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