Outlook 2024: T-Mobile, Carvana bring big deals in 2023 as pace of LM exercises slows

By Wendy Van Sickle

Columbus, Ohio, Dec. 29 – The year 2023 was generally a mild year in liability-management exercises with just 15 issuers holding LM transactions in excess of $2 billion and seven of those undertakings falling below $3 billion, according to data compiled by Prospect News.

The year in liability management appeared to lag the one before, which itself lagged the year before it. Year-to-date figures were down in terms of dollars and total deals at months’ ends consistently throughout 2023, which was the same case in 2022 versus 2021.

Few LM deals topped $5 billion in 2023, a milestone that was met by at least nine deals in 2022, but Cogent Communications Holdings, Inc.’s acquisition of T-Mobile US, Inc.’s wireline business did kick loose some activity in the space. Ahead of the acquisition, which closed on May 1, T-Mobile’s wholly owned subsidiaries Sprint LLC and Sprint Capital Corp. launched consent solicitations that covered $9.75 billion and $4.48 billion of the subsidiary issuers’ notes, respectively.

The consent solicitations opened on March 13. The Sprint solicitation related to proposed amendments to its $4.25 billion 7.875% notes due 2023, its $2.5 billion 7.125% notes due 2024, its $1.5 billion 7.625% notes due 2025 and its $1.5 billion 7.625% notes due 2026.

The Sprint Capital solicitation related to proposed amendments to its $2.475 billion 6.875% notes due 2028 and its $2 billion 8.75% notes due 2032.

Sprint received consents from holders of 91.3% principal amount of the $4.25 billion 7.875% notes due 2023; 93.32% principal amount of the $2.5 billion 7.125% notes due 2024; 95.92% principal amount of the $1.5 billion 7.625% notes due 2025; and 93.96% principal amount of the $1.5 billion 7.625% notes due 2026.

Sprint Capital obtained consents from holders of 88.83% principal amount of the $2.475 billion 6.875% notes due 2028; and 94.03% principal amount of the $2 billion 8.75% notes due 2032.

Carvana tender, exchange

In the year’s only other liability management deal to breach the $5 billion mark, after calling off an exchange offer two months before that had failed to meet its minimum participation threshold, Tempe, Ariz.-based used automobile online retailer Carvana Co. pulled up on Aug. 2 with an offer to exchange its four series of unsecured notes, with maturities from 2027 through 2030, for up to a total principal amount of $4,275,000,000 of three tranches of senior secured notes.

The new notes offered included up to $1 billion of new 9%/12% cash/PIK senior secured notes due 2028; up to $1.5 billion of new 11%/13% cash/PIK senior secured notes due 2030; and up to $1,775,000,000 of new 9%/14% cash/PIK senior secured notes due 2031.

Concurrently with, but separately from, the exchange offers, the company held a $425 million cash offer to purchase any and all of its $500 million outstanding 5 5/8% senior notes due 2025 for a price of $850 per $1,000 principal amount, plus accrued interest.

The company also held a concurrent solicitation of consents seeking to eliminate substantially all of the restrictive covenants as well as some events of default and related provisions from the notes’ indentures.

Holders of more than 90% of Carvana’s unsecured notes had agreed to participate in the exchange before it opened, and, ultimately, participation well exceeded that mark.

By the offer’s end on Aug. 30, holders had tendered $568,165,000, or 94.7%, of the $600 million outstanding 5½% senior notes due 2027; $577,527,000, or 96.3%, of the $600 million outstanding 5 7/8% senior notes due 2028; $724,349,000, or 96.6%, of the $750 million outstanding 4 7/8% senior notes due 2029; and $3,247,959,000, or 99.2%, of the $3,275,000,000 outstanding 10¼% senior notes due 2030.

Additionally, $401,742,000, or 80.3%, of the 5 5/8% senior notes due 2025 were tendered and accepted for purchase.

On March 22, Carvana had offered to exchange all five series of unsecured notes for up to $1 billion principal amount of new 9%/12% cash/PIK toggle senior secured second-lien notes due 2028. Initially, that offer was set to expire on April 19, but it survived three extensions, dragging on until Carvana pulled the plug on it on June 2 after its minimum condition that at least $500 million principal amount of existing notes had to be validly tendered had yet to be met. Even $50 of extra new notes per $1,000 of existing notes – offered under an April 19 amendment – for the series due in 2025 did not do the trick.

Activision Blizzard swap

In one of a half dozen LM deals, including some that were consent solicitations only, to total in the $3 billion to $4 billion range, Microsoft Corp. offered in mid-October to exchange any and all of the outstanding notes issued by Activision Blizzard, Inc. for up to $3.65 billion of new notes issued by Microsoft and cash and a concurrent solicitation of consents from holders of Activision Blizzard’s notes to some amendments to the indentures.

Five series of Activision Blizzard notes were covered under the offer with coupons ranging from 1.35% to 4.5% and maturities spanning 2026 through 2050.

For each series, Microsoft offered to exchange all notes tendered by the early deadline for new notes with the same tenor and coupon as the notes exchanged, plus $1 in cash.

Holders exchanged $976,456,000 of the $850 million outstanding 3.4% notes due 2026; $354,846,000 of the $400 million outstanding 3.4% notes due 2027; $448,766,000 of the $500 million outstanding 1.35% notes due 2030; $394,354,000 of the $400 million outstanding 4.5% notes due 2047; and $1,440,426,000 of the $1.5 billion outstanding 2.5% notes due 2050.

Canadian Pacific

In a similar offer to the Microsoft-Activision Blizzard affair, Canadian Pacific Railway Co. announced on March 20 the start of exchange offers for seven series of notes issued by Kansas City Southern for notes to be issued by Canadian Pacific for a total exchange consideration per $1,000 principal amount of a like principal amount of new notes with the same interest rates, interest payment dates and maturity dates as the existing notes plus $1 in cash.

At the settlement of this offer, Canadian Pacific ended up issuing $226,823,000 of new 3.125% notes due 2026; $414,838,000 of new 2.875% notes due 2029; $448,453,000 of new 4.3% notes due 2043; $462,991,000 of new 4.95% notes due 2045; $497,861,000 of new 4.7% notes due 2048; $542,518,000 of new 3.5% notes due 2050; and $420,463,000 of new 4.2% notes due 2069.

Chile exchange offers

In a pair of exchange exercises that covered dollar- and euro-denominated notes, Chile offered to exchange $6.48 billion of notes that were due to mature in 2025 through 2053 and €4.95 billion of notes due in 2025 through 2030 for later-maturing notes. While the affected-note totals were large, participation in the offers was relatively slim.

For four series of the dollar notes, due in 2025 through 2033, Chile invited holders to submit offers to exchange their notes for either 2036 notes or 2054 notes. For the two remaining series that were covered by the offer, due in 2043 and 2053, Chile was offering 2054 notes only. For each series of the euro notes, the republic was offering new notes due in 2034.

Under the dollar offers, holders tendered an aggregate principal amount of $971,373,000 for exchange under the combined dollar-denominated offers, with $661,199,000 tendered by group A and $310,174,000 tendered by group B. In the euro offers, holders tendered an aggregate total of €448,194,000 notes.

LM medley

Other issuers that held sizable LM exercises in 2023 included Leuven, Belgium-based beer brewer Anheuser-Busch InBev SA/NV, which offered in October an up to $3 billion purchase price for 18 series of notes issued by its wholly owned subsidiaries Anheuser-Busch InBev Worldwide Inc., Anheuser-Busch Cos. LLC and Anheuser-Busch InBev Finance Inc. The offer cap was hit by the early deadline.

At the end of July, British American Tobacco announced a $2.9 billion capped tender offer for notes issued by B.A.T Capital Corp., Reynolds American Inc. and B.A.T. International Finance plc. By that offer’s early tender date on Aug. 11, it was oversubscribed and the London-based international tobacco company said it would accept tenders of $2,827,867,000, €155 million and £632,569,000 of notes.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.