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Bond Market News
Lumen’s Bonds Move Higher Amid Upgrade to B- by S&P
March 4, 2025
Lumen Technologies was upgraded by a notch to B- from CCC+ by S&P. The upgrade reflects improved liquidity following its successful Private Connectivity Fiber (PCF) deals, including a $5bn agreement with Microsoft and other hyperscalers for AI data connectivity. It also announced new PCF transactions worth over $3.5bn, mainly involving dark fiber sales with upfront payments expected, especially in 2025. These deals allowed Lumen to improve its liquidity and reduce debt, with a forecasted 2025 free operating cash flow (FOCF) of $400-450mn, bolstered by $1.9bn in cash and credit availability. Lumen’s capital structure remains sustainable due to its PCF deals, though EBITDA pressures and industry challenges are expected to weaken credit metrics in the near term. The company’s leverage is projected to rise to 5.8x in 2025 but improve to 5.2-5.3x by 2027. Additionally, Lumen is exploring the sale of its mass markets business, which covers only 19% of its service area with fiber, and a sale could reduce debt, improve financial flexibility, and help the company focus on its AI-driven fiber expansion. The company was upgraded to Caa1 by Moody’s in August last year.
Its 5.125% 2026s jumped higher by 3.8 points to trade at 101, yielding 4.55%.
For more details on the rating action, click here
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