In addition to the exchange, Brightspeed secured $3.65bn of new money from its secured lenders and Apollo to fund its fiber build, according to a statement from the company and ratings notes on the deal.

The bank debt that financed Apollo’s acquisition of Brightspeed assets in 2022 and exchanged under this transaction had failed to get syndicated and reportedly remained hung for nearly two years.

According to a 9fin source familiar with the transaction, Brightspeed’s pro forma capital structure comprises the following first lien tranches:

• First-out — The following pari passu tranches due April 2031, with interest payable in cash at SOFR+425bps:$2.9bn new money delayed draw term loan, partially drawn at close and with no ticking fee $270m revolver due April 2031 — this is a rollover of the pre-transaction revolver due 2027 at par, is fully drawn up to a $210m sublimit at close, with the balance used for letters of credit, and has no springing maturity
• Second-out — $2.486bn term loan due October 2031, with interest payable (i) in kind at SOFR+575bps for the first 18 months, and (ii) thereafter in cash at SOFR+500bps $250m of this term loan is new money, and $2.236bn is takeback paper for the secured lenders
• Third-out — $500m new money delayed draw term loan due October 2031, with interest at 14% payable (i) fully in kind for 24 months, and (ii) 50% in cash and 50% in kind thereafter
• Fourth-out — Takeback paper in the form of a $1.475bn term loan due October 2031, with interest payable in kind at SOFR+650bps through maturity

The source also noted that each tranche of pre-transaction debt exchanged at the same discount to par, i.e. around 23%, and that the $505m in super-senior delayed draw term loans that Brightspeed had availed of in April 2024 and that were due September 2024 were taken out.

Apollo acquired incumbent local exchange carrier (ILEC) assets, including subsidiary Embarq, from Lumen Technologies for $7.5bn to create Brightspeed in 2022. Since then, Brightspeed has seen liquidity decline and has underperformed on revenue and EBITDA, according to Fitch’s ratings downgrade from June. In that same note, the ratings agency said that the company’s capital structure was “unsustainable” and that a near-term debt restructuring was “inevitable.”

Over $1.2bn worth of unsecured notes due 2036 issued by Embarq, which are the subject of a dispute between noteholders, Brightspeed and Apollo, were not addressed in the exchange transaction. A Supreme Court of the State of New York judge ruled against the noteholder group in April, and the decision has since been appealed.

Paul Weiss and Akin Gump served as legal counsel for Brightspeed, and PJT Partners served as investment banker. The lenders were advised by Davis Polk as legal counsel and Evercore as financial advisor.

Brightspeed declined to comment for this story beyond the details in the company’s statement. Representatives for Apollo did not respond to multiple requests for comment.

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