Lumen Overhauls Debt Load With Eye on Growth

Lumen Technologies last month announced the successful completion of a repricing transaction of Level 3 Financing, Inc.’s (“Level 3”) $2.4 billion credit facilities at Term SOFR + 3.25%. The new pricing represents a reduction of 100 basis points, resulting in $24 million in annual interest expense savings. Additionally, in connection with the refinancing transaction certain other modifications were made to the covenants in the Credit Agreement to provide additional flexibility to Level 3.
Chris Stansbury, Lumen's CFO, discusses the company's debt restructuring and path toward for growth, the sale of its residential-fiber unit to AT&T, and the current state of the telecom space. Chris speaks with Tim Stenovec, Emily Graffeo and Nina Trentmann on Bloomberg Businessweek Daily.

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News. You're listening to Bloomberg
BusinessWeek with Carol Masser and Tim Stenoveek on Bloomberg Radio.
It is time for another edition of the CFO of Briefing.
This week we are joined by Chris Stansbury, chief financial
Officer and EVP of the Louisiana based publicly traded global

(00:24):
communication services company Loomen Technologies, marketcap of about six point
eight billion dollars shares so far this year, up more
than twenty five percent. Also with us here in the
studio is Nina Trentman, Bloomberg News Senior Editor. She writes
the CFO Briefing newsletter. You can subscribe to it at
Bloomberg dot com slash CFO Dash Briefing. Chris is featured
in the most recent edition of the newsletter. Chris joins

(00:46):
us from Denver. Chris, welcome the company divesting non core assets.
For example, earlier this year announcing the sale of its
mass market residential fiber unit to AT and T for
five point seventy five billion dollars in cash. Now, what
you're planning to do is leasing existing fiber routes to
hyper scalers and social media companies to transport AI traffic

(01:08):
between data centers. I want to know how big of
an opportunity is it to lease to these hyperscalers.

Speaker 2 (01:15):
Yeah, thanks for having me today. It's been quite a
journey at Luhman over the last three and a half years.
And really what we see as an opportunity and have
seen really through our transformation is the AI multi cloud
world that's being developed right now. The network of yesterday
wasn't built to support it. And if you really think

(01:38):
about the economics of AI and the economics of a GPU,
you want to keep that GPU fed as much as
it can consume so that they're spinning constantly, and that's
where you get the economic benefit. So the problem with
the network that has existed so far is that as

(01:59):
those data get spread further and further away, as data
centers are in search of power and cooler temperatures, there's
latency problems and there's access problems. It takes a long
time for networking to adjust. So what we're doing is
building a mesh that basically goes anywhere to anywhere where

(02:19):
the customer on demand can move those workloads where they
need them in super low latency manner. So that's the
big change, and so it's not just hyperscalers, it's really
the full connectivity between the hyper scalers running those clouds,
the hyperscalers obviously building those AI algorithms, and large enterprise

(02:41):
customers who are on the AI journey now and we'll
be using it much more heavily in the future.

Speaker 3 (02:47):
Chris, thanks for joining us again. It's great to chat.
Just wondering with the AT and T deal and also
what you've been done in capital markets in recent weeks.
You've really improved your financing structure. You're saved one hundreds
of millions in interest expenses a year. Talk to us
a little bit about that.

Speaker 2 (03:06):
Yeah, if you go back in time when we all
joined Lumen and saw this opportunity, the balance sheet was
not our friend. We had a lot of debt. Half
that debt was due in one year. It was due
in twenty twenty seven, and that was job number one.
We really needed to strengthen the foundation of the company

(03:26):
so that we could go do the things that we're
executing against today. So that was really accomplished through a
couple of things. One is we did the largest out
of court debt restructuring in history that's not quite two
years ago, and that allowed us to push those maturities
out a bit, but at a significant expense. Our annualized

(03:48):
interest expense at that point was about one point four
billion dollars. But from there we saw in the middle
of those negotiations, we saw this opportunity with the hyperscalers,
and soon after that that debt negotiation was completed, we
signed eight billion dollars worth of deals and that has
grown since. That allowed us to monetize an asset that

(04:11):
has been in the ground for twenty five years, which
is conduit that we can blow fiber through to meet
the needs of the hyperscalers in a fairly short period
of time versus building new and that's really the core
enduring advantage of this business. And then we layer the
digital on top of that. But the cash from those

(04:34):
deals allowed us to refinance and delever, so we've made
a number of moves so far this year, and with
the sale of the consumer fiber business to AT and
T when that closes, our debt will be down to
just over thirteen billion dollars in Our interest expense on
an annualized basis will be about seven hundred million, so

(04:54):
in a two year period, dramatically reshaping both the quantum
of debt as well as the maturity curve. And now
that balance sheet is a real asset for US as
we invest in the AI multi cloud world.

Speaker 3 (05:09):
Yeah, IM actually wondering about the investments. Of course, there's
a lot of campex that's required in a business like yours.
We've seen earlier this year the One Big Beautiful Bill
Act that was passed, which tries to encourage investment, including
in capital investments, by allowing USCFO to depreciate certain investments faster,

(05:30):
Like do you think this will make an impact as
you're thinking about future investments in your business here in
the US.

Speaker 2 (05:36):
Definitely. If you go back to the twenty seventeen legislation
that the big problem with that legislation is is it
created an unequal playing field between say, more service oriented
or asset light companies and asset heavier infrastructure companies. And
if you look at where the administration is focused today,

(05:57):
it's clearly around infrastructure. I think the US has the
biggest challenges really is making sure that we don't get
too far behind with our infrastructure. So the recent legislation
has leveled that playing field, and really that was around
two things. The first is is that there was interest

(06:19):
deductibility limits that used to exist that have been relaxed
dramatically because again, asset heavy infrastructure companies tend to have
higher leverage. And then to your point, the ability to
accelerate depreciation to help on the tax side is significant.
That reduces the risk that companies that are investing in

(06:42):
infrastructure take on when they make those kinds of investments.
So it's absolutely an opportunity for us.

Speaker 1 (06:49):
Chris cann have to leave it there, but you've got
to come back and join us once again. And I
do remind everybody that Chris is featured in the most
recent edition of the CFO Briefing newsletter. You can sign
up for it at Bloomberg dot com slash CFO Dash Briefing.
We've been speaking with Chris Stansbury, CFO and EVP of
Luminant Technologies also joining us here in the studio. Nina Trentman,

(07:09):
Bloomberg News Senior Editor. Sign up for that CFO Briefing newsletter.