High Yield Industry Update
Americas Stressed Maturities: Dish, Altice, Lumen and Sabre Headline Public Stressed Credits With Upcoming Maturities; Credit Cloud Search Reveals 38 Stressed Public Credits With Maturities Before 2026, YTM Over 12%
Thu 07/20/2023 13:37 PM
Relevant Items:
Link to Upcoming Maturities Search on Credit Cloud
Link to Credit Cloud Portal
Link to PDF Download
Reorg has identified 38 public companies within our stressed/distressed universe that have upcoming maturities between July and the end of 2025 and at least one bond trading with a yield to maturity over 12%. The full list of companies, including the specific information on the maturing security as well as the highest yield to maturity in their capital structure, is below. A number of the companies listed have multiple issues trading with a yield to maturity above 12%; however, the list below only shows the highest yield to maturity.
Credit Cloud
Through Credit Cloud, subscribers can see key information regarding companies’ capital structures, including maturity dates. Users can add additional screening metrics such as lifecycle, as used in this article, as well as pricing and financial metrics. For instance, included in this search, Reorg, through Credit Cloud, has pulled security-specific information on the maturing security, including principal amount, maturity date and next coupon date when applicable, as well as information on the companies, including the total principal amount of debt outstanding, the amount committed and drawn under its revolvers and its cash balance.
The search displaying the 38 companies shown in this article can be found HERE. The search is for securities with a maturity date before 2026, and a sample output is below:
Companies with information loaded into Credit Cloud that was used in this report include Reorg’s coverage universe within Americas and Americas Middle Market as well as additional high-yield credits found in the major credit indexes. For a list of Reorg coverage that can be filtered by lifecycle, including stressed versus performing, click HERE.
Selected Company Analysis
Lumen Technologies
On June 5, during its investor day presentation, Lumen revealed that it plans to use the estimated $1.5 billion of cash proceeds from the previously disclosed sale of its EMEA business to pay down its debt that matures in 2025. In addition, Lumen announced guidance indicating that EBITDA is expected to continue to decline, troughing in 2024 before improving through 2027.
There has been some recent discussion in the market about whether Lumen can actually use the EMEA proceeds to pay down debt under its current credit agreement and whether, in fact, the use of proceeds from the sale of its Latin American assets to pay down unsecured debt in the third quarter of 2022 caused an event of default at its Level 3 subsidiary, which owned the Latin American assets as well as the to-be-sold EMEA assets.
In recent days, Lumen’s debt has traded down as concerns over the environmental impact of lead-sheathed copper cables, mostly due to the company’s extensive legacy Qwest and Centurytel networks, have come to the fore.
Dish Network
On July 14, Dish provided the FCC with its latest 5G Buildout Status Report certifying that as of June 14, the company offered 5G broadband service, as defined in the order mandating the status report, to 73.56% of the total U.S. population, in compliance with its nationwide broadband commitment. Dish further stated that its compliance meant that the company was eligible to receive an additional two years, until June 14, 2025, to meet the final buildout deadlines for its AWS-4 H and lower-700 MHz E block licenses, which are further discussed in Reorg’s Dish coverage initiation.
On Dish’s conference call to discuss its first-quarter 2023 earnings, Chairman Charlie Ergen said the company would look to “equity” or an “equity-like” transaction to address its upcoming $1 billion 2.375% convertible notes maturity due March 15, 2024. He characterized Dish as “asset rich” but recognized that the trading levels of its debt at the time did not “bode well for [its] ability to access in a competitive way to the debt markets.” As to the company’s specific approach to its upcoming maturities and capital requirements, Ergen said, “Obviously, anything is on the table,” further opining, “I think there’s more opportunity for us than people realize.”
In addition to the upcoming maturities, Ergen also labeled the 800 MHz spectrum licenses connected with the company’s T-Mobile option, which it can purchase for $3.59 billion, as “extremely important for us to be able to complete.”
Sabre Corp.
Sabre’s ability to hit its 2025 EBITDA target remains uncertain, owing to recent trends in profitability per transaction even if airline and hotel travel return to pre-Covid-19 levels. As of the LTM period that ended in March, the company generated approximately $117 million in adjusted EBITDA and negative $280 million of free cash flow.
The company has a $200 million cost savings plan, including a 15% forecast headcount reduction as well as a technology cost reduction, as it switches its server needs to the cloud. It also hopes to generate a further $150 million in technology cost improvements, although as technology spending is below 2019 levels, this may be difficult to achieve.
In early June, Sabre raised $700 million in first lien, double-dip debt to fund a tender offer. This loan potentially allows the new lenders to increase their recovery as they will have claims against multiple Sabre entities in a hypothetical restructuring. Reorg analyzed double-dip financing opportunities HERE. After the announcement of the commitment letter, certain of Sabre’s existing term lenders reportedly organized under Paul Hastings to assess their options.
Altice USA Inc.
Altice faces declining FCF as a result of continued spending on building out the company’s fiber network. FCF turned negative, to approximately negative $184 million, in the 12-month period ended March 31 as capital expenditures reached $2.1 billion. In the first quarter, Altice burned $166 million in cash driven by higher capex on favorable weather. As of the end of the first quarter, Altice had liquidity of $1.792 billion, consisting of $1.644 billion of availability under its revolving credit facility and $148 million of unrestricted cash, not including cash and revolver availability at majority-owned Lightpath.
Fiber build expenses have been pressured by persistent inflationary pressures, labor shortages and rising borrowing costs. Reorg reviewed fiber build costs across the industry including Altice and Lumen HERE.
Link to Upcoming Maturities Search on Credit Cloud
Link to Credit Cloud Portal
Link to PDF Download
Reorg has identified 38 public companies within our stressed/distressed universe that have upcoming maturities between July and the end of 2025 and at least one bond trading with a yield to maturity over 12%. The full list of companies, including the specific information on the maturing security as well as the highest yield to maturity in their capital structure, is below. A number of the companies listed have multiple issues trading with a yield to maturity above 12%; however, the list below only shows the highest yield to maturity.
(Click HERE for PDF download.)
Credit Cloud
Through Credit Cloud, subscribers can see key information regarding companies’ capital structures, including maturity dates. Users can add additional screening metrics such as lifecycle, as used in this article, as well as pricing and financial metrics. For instance, included in this search, Reorg, through Credit Cloud, has pulled security-specific information on the maturing security, including principal amount, maturity date and next coupon date when applicable, as well as information on the companies, including the total principal amount of debt outstanding, the amount committed and drawn under its revolvers and its cash balance.
The search displaying the 38 companies shown in this article can be found HERE. The search is for securities with a maturity date before 2026, and a sample output is below:
Companies with information loaded into Credit Cloud that was used in this report include Reorg’s coverage universe within Americas and Americas Middle Market as well as additional high-yield credits found in the major credit indexes. For a list of Reorg coverage that can be filtered by lifecycle, including stressed versus performing, click HERE.
Selected Company Analysis
Lumen Technologies
On June 5, during its investor day presentation, Lumen revealed that it plans to use the estimated $1.5 billion of cash proceeds from the previously disclosed sale of its EMEA business to pay down its debt that matures in 2025. In addition, Lumen announced guidance indicating that EBITDA is expected to continue to decline, troughing in 2024 before improving through 2027.
There has been some recent discussion in the market about whether Lumen can actually use the EMEA proceeds to pay down debt under its current credit agreement and whether, in fact, the use of proceeds from the sale of its Latin American assets to pay down unsecured debt in the third quarter of 2022 caused an event of default at its Level 3 subsidiary, which owned the Latin American assets as well as the to-be-sold EMEA assets.
In recent days, Lumen’s debt has traded down as concerns over the environmental impact of lead-sheathed copper cables, mostly due to the company’s extensive legacy Qwest and Centurytel networks, have come to the fore.
Dish Network
On July 14, Dish provided the FCC with its latest 5G Buildout Status Report certifying that as of June 14, the company offered 5G broadband service, as defined in the order mandating the status report, to 73.56% of the total U.S. population, in compliance with its nationwide broadband commitment. Dish further stated that its compliance meant that the company was eligible to receive an additional two years, until June 14, 2025, to meet the final buildout deadlines for its AWS-4 H and lower-700 MHz E block licenses, which are further discussed in Reorg’s Dish coverage initiation.
On Dish’s conference call to discuss its first-quarter 2023 earnings, Chairman Charlie Ergen said the company would look to “equity” or an “equity-like” transaction to address its upcoming $1 billion 2.375% convertible notes maturity due March 15, 2024. He characterized Dish as “asset rich” but recognized that the trading levels of its debt at the time did not “bode well for [its] ability to access in a competitive way to the debt markets.” As to the company’s specific approach to its upcoming maturities and capital requirements, Ergen said, “Obviously, anything is on the table,” further opining, “I think there’s more opportunity for us than people realize.”
In addition to the upcoming maturities, Ergen also labeled the 800 MHz spectrum licenses connected with the company’s T-Mobile option, which it can purchase for $3.59 billion, as “extremely important for us to be able to complete.”
Sabre Corp.
Sabre’s ability to hit its 2025 EBITDA target remains uncertain, owing to recent trends in profitability per transaction even if airline and hotel travel return to pre-Covid-19 levels. As of the LTM period that ended in March, the company generated approximately $117 million in adjusted EBITDA and negative $280 million of free cash flow.
The company has a $200 million cost savings plan, including a 15% forecast headcount reduction as well as a technology cost reduction, as it switches its server needs to the cloud. It also hopes to generate a further $150 million in technology cost improvements, although as technology spending is below 2019 levels, this may be difficult to achieve.
In early June, Sabre raised $700 million in first lien, double-dip debt to fund a tender offer. This loan potentially allows the new lenders to increase their recovery as they will have claims against multiple Sabre entities in a hypothetical restructuring. Reorg analyzed double-dip financing opportunities HERE. After the announcement of the commitment letter, certain of Sabre’s existing term lenders reportedly organized under Paul Hastings to assess their options.
Altice USA Inc.
Altice faces declining FCF as a result of continued spending on building out the company’s fiber network. FCF turned negative, to approximately negative $184 million, in the 12-month period ended March 31 as capital expenditures reached $2.1 billion. In the first quarter, Altice burned $166 million in cash driven by higher capex on favorable weather. As of the end of the first quarter, Altice had liquidity of $1.792 billion, consisting of $1.644 billion of availability under its revolving credit facility and $148 million of unrestricted cash, not including cash and revolver availability at majority-owned Lightpath.
Fiber build expenses have been pressured by persistent inflationary pressures, labor shortages and rising borrowing costs. Reorg reviewed fiber build costs across the industry including Altice and Lumen HERE.
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