https://www.bnnbloomberg.ca/lumen-debt-restructuring-draws-ire-from-left-behind-creditors-1.1993304
(Bloomberg) -- A proposed deal to restructure one of the largest piles of US distressed debt is drawing ire from creditors who have been left out of the transaction.
Lumen Technologies Inc., a struggling telecommunications firm with nearly $20 billion of debt, cut the deal with a group of investment firms including Silver Point Capital, Pacific Investment Management Co., Diameter Capital Partners and Blackrock Inc., according to people with knowledge of the matter who asked not to be identified because talks are private. Creditors who weren’t part of the negotiations aren’t sure if they will be allowed to participate in the restructuring, or what will happen to their debt if they can’t.
Lumen’s proposal calls for creditors to swap certain securities tied to its Level 3 unit into longer-dated, higher-coupon maturities. The deal would also hand Lumen $1.2 billion in fresh financing provided by select existing creditors. Holders of around $7 billion of the company’s debt have signed on.
The plan is the latest example of controversial distressed debt financings that pit creditors against each other and frequently end up in court. Such transactions have grown more common in recent years as companies seek to take advantage of loose credit agreements and creditors battle over a relatively small pile of troubled company debt.
Lumen’s new deal combines several contentious debt moves, the people said, including a new loan that effectively moves other creditors back in line for repayment. Lumen is also contemplating potential asset transfers, as well as a “double-dip” transaction that grants certain creditors multiple claims against the same entity.
Creditors who participated in the deal were under pressure to come up with a restructuring agreement before Lumen reported quarterly results on Tuesday, some of the people said.
Representatives for Lumen and the funds declined to comment.