Lumen sinks following amended restructuring plan; DISH mostly recovers; Spirit Airlines lower

By Cristal Cody

Tupelo, Miss., Jan. 26 – Distressed bonds from Lumen Technologies, Inc. subsidiary Level 3 Financing, Inc. took a major hit Friday in the aftermath of Thursday’s amended restructuring agreement.

Level 3’s notes slid around 3 points to over 19 points in some of the day’s most active distressed junk bonds, a source reported.

Lumen’s 4½% senior notes due 2029 were down 3 points in light trading after staying steady on Thursday.

DISH DBS Corp.’s bonds moved higher this week as the paper continues to recover following a “kneejerk” reaction following new parent’s EchoStar Corp.’s announced plans to transfer collateral assets out of the company and conduct distressed debt exchange offers for four tranches of junk bonds, a source said.

“There’s a little bit of controversy there,” a source said. “They’ve taken some of the assets and are moving them into EchoStar. This stuff happens once in a while, and it freaks people out. The bonds had a knee-jerk reaction, but I think they’ve recovered a little bit.”

DISH’s 7¾% notes due 2026 added ½ point Friday and were going out more than 3 points better on the week and over 2 points higher from two weeks earlier.

DISH paper was mostly moving higher over the session by about ¼ point to ½ point, though some tranches were a touch softer, a source said.

The company’s 5 1/8% senior notes due 2029 were down ¼ point.

DISH’s “secured paper is basically unchanged,” a source reported.

Overall market tone slipped Friday as stocks declined.

The iShares iBoxx High Yield Corporate Bond ETF was down 6 cents, or 0.08%, to $77.63.

Spirit Airlines Inc.’s 8% senior secured notes due 2025 drifted ¼ point lower Friday in heavy trading but the bonds remained 4 points better on the week.

The notes have come back from a low handle in the 40s after a federal court ruling blocked its $3.8 billion merger with JetBlue Airways Corp. on Jan. 16 but still lag by about 10 points from before the news.

The issue was among the day’s most active junk bonds moving on more than $27 million of volume after Spirit Airlines announced that JetBlue notified it that closing conditions required under the agreement may not be satisfied by the outside date, and the agreement may be terminated on or after Jan. 28.

Spirit said Friday in a regulatory filing that there is “no basis” for terminating the agreement.

Level 3, Lumen decline

Level 3’s 3¾% senior notes due 2029 (B1/B/B+) plummeted 19½ points to 31¼ bid on $7 million of action Friday, a source reported.

The issuer’s 4 5/8% senior notes due 2027 (B1/B/B+) also dropped 11 points to 50 bid on over $5 million of trading.

The 4½% senior notes due 2029 (Caa3/CCC-/CCC-) from parent Lumen gave back 3 points to hit 25 bid on lighter supply totaling $3 million over the afternoon.

The bonds were mostly unchanged Thursday at 28½ bid.

Lumen reported Thursday it reached an amended TSA with subsidiaries Level 3 Financing, Inc. and Qwest Corp. that has support from a group of creditors that now represent over $12.5 billion of outstanding debt and commitments from Lumen and its subsidiaries and represent over 70% of the total Lumen and Level 3 debt maturing through 2027.

The new support agreement plans transactions in the first quarter that include $1.33 billion in new-money long-term senior secured first-lien debt by Level 3, an approximately $1 billion new revolving credit facility at Lumen, the extension of maturities to mostly 2029 and beyond and the repayment of certain of Lumen’s and Qwest’s debt.

The outside date of completion for the transaction support agreement is Feb. 29, which may be extended to March 31.

Lumen intends to release fourth-quarter results on Feb. 6.

Shares (NYSE: LUMN) in the Monroe, La.-based global telecommunications company finished Friday 1.4% better at $1.40.

DISH up on week

DISH DBS’ 5¼% senior secured notes due 2026 (B2/B-), which are not included in the exchange offers, were changing hands in the 78¾ bid to 79¾ bid range Friday on $6 million of volume and going into the close ½ point better on the day at 79½ bid, a source said.

The company’s 5 1/8% senior notes due 2029 (Caa2/CC) were heading out at 38¾ bid on over $5 million of volume, down from the 39¼ bid to 39½ bid area on Thursday.

“It’s up a couple points from the lows,” a source said.

DISH’s 7¾% notes due 2026 (Caa2/CC) added ½ point Friday to a quote of 59¼ bid in the issuer’s most active tranche on $15 million of volume.

The bonds traded in the same session a week ago at 56 bid, 57 offered and at 57 bid, 58 offered in the same session a week earlier.

So far in January, DISH parent EchoStar Corp. has announced a collateral transfer, exchange offers for two tranches of convertible notes and that DISH DBS Issuer LLC plans to exchange its 5 7/8% senior notes due 2024, 7¾% senior notes due 2026, 7 3/8% senior notes due 2028 and 5 1/8 senior notes due 2029 for up to $3 billion of new secured notes.

EchoStar is facing fraud accusations from at least two creditor groups due to the exchange offers and its plans to transfer collateral out of DISH.

The Englewood, Colo.-based satellite cable company’s debt exchange offers expire Feb. 12.

Spirit notes slip

Spirit Airlines’ 8% senior secured notes due 2025 fell ¼ point to 64 bid Friday on around $27 million of paper traded, a source said.

While still pressured and soft on the day, the bonds were better on the week.

The issue was quoted in the same session a week ago at 60 bid, 61 offered.

The bonds have come back from a low of 47½ bid, 48½ offered after a court ruling blocked its $3.8 billion merger with JetBlue Airways on Jan. 16 but still off of levels at 74½ bid, 75½ offered before the news.

The U.S. District Court of the District of Massachusetts granted the U.S. Department of Justice’s request for a permanent injunction against the proposed merger of Spirit and JetBlue.

Spirt Airlines plans to release fourth-quarter results and its outlook on Feb. 8.

Remaining independent will “compound the pressure on Spirit’s credit profile,” according to a Moody’s Investors Service report this week.

“The company's senior secured notes with $1.1 billion outstanding mature on 20 September 2025,” Moody’s said. “The acquisition's blockage prevents Spirit from becoming part of a larger organization with potentially better capacity to raise capital and will make it more difficult for the company to refinance or retire the notes.”

The Miramar, Fla.-based low-cost airline’s stock (NYSE: SAVE) closed down 13.43% to $6.25 Friday, off its low earlier in the session of $5.68.

Distressed index up

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns climbed Thursday to 0.93%, up from 0.01% on Wednesday and Tuesday and improved from 0.45% on Monday.

Month-, quarter- and year-to-date total return losses dropped to negative 1.48% on Thursday from minus 2.39% on Wednesday, minus 2.41% on Tuesday and minus 2.42% at the week’s start.

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