Yeah I thought the LUMN 2028 Bonds were interesting at 15% YTM and added a little today yielding 18% YTM. But even the selling in the bonds is not completely irrational (see S&P downgrade below) and I guess the senior unsecured bonds aren't really senior to much of anything other than the common stock (CTBB and CTDD have priority for example apparently which is why those still only yield about 8%). Hopefully their assets are worth much more than their Enterprise Value, and can be successfully monetized for the benefit of the bond and equity holders. They do have several years to right the ship so even the equity owners still have a decent chance:
Long term debt; (Dollars in millions)
2023 $ 154
2024 158
2025 1,743
2026 806
2027 9,387
2028 and thereafter 8,500
Total long-term debt $ 20,748
And they have EMEA closing in late 2023, early 24' for $1.8 bil in cash.
Lumen Technologies Inc. Downgraded To 'B+' From 'BB-'; Outlook Negative
U.S.-based telecommunications provider Lumen Technologies Inc. reported weak results during the fourth quarter of 2022 and provided 2023 guidance that was sharply below our expectations.
Under new management, the company plans to reposition the business for longer-term success, which will require about $435 million to $600 million of additional investment in 2023.
These investments, coupled with secular industry pressures and dis-synergies from recent asset sales, will contribute to lower earnings and negative free operating cash flow (FOCF), such that S&P Global Ratings-adjusted leverage approaches 4.75x in 2023 and remains above that level for the next couple of years.
We lowered our issuer credit rating on Lumen to 'B+' from 'BB-'. At the same time, we lowered our issue-level rating on Lumen's senior unsecured debt to 'B' from 'B+' and our issue-level rating on its senior secured debt to 'BB' from 'BB+'. We lowered our issue-level rating on wholly-owned subsidiary Level 3's senior secured debt to 'BB' from 'BB+' and our issue-level rating on its senior unsecured debt to 'B+' from 'BB-'. In addition, we lowered our issue-level rating on subsidiary Qwest Corp.'s senior unsecured debt to 'BB' from 'BB+' and our issue-level rating on Qwest Cap Funding's senior unsecured debt to 'B+' from 'BB-'.
The negative outlook reflects the potential for a lower rating due to the uncertainty around Lumen's new strategy and its ability to stabilize revenue and EBITDA over the next couple of years while generating meaningful FOCF, which could result in leverage rising above 5.25x and FOCF to debt remaining below 5%.
Although unlikely in the near-term, we could lower the rating on Lumen if:
The revenue declines in the enterprise segment are greater than expected;
The company resumes stock repurchases without a corresponding improvement in operating trends; and
Lower EBITDA, higher interest expense, and elevated capex cause leverage to rise above 5.25x.
We could revise the outlook to stable if:
The company is successful in executing on its strategy, which would entail demonstrating improving top line performance in its business and mass market segments;
EBITDA and FOCF trends improve such that FOCF to debt to is approaching 5%.
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