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CommScope is set to engage with two creditor groups — one secured-weighted and one unsecured-weighted — to potentially strike a deleveraging liability management deal following the announced asset sales on Thursday that could bring in nearly $2.1bn in cash, according to sources.

The announcement sparked a rally in the company’s debt.

Before the deal was announced, the two creditor groups had been considering working together and potentially even signing a joint cooperation agreement, according to sources, after getting stonewalled by the company. The company — presumably while lining up the asset sale — was non-responsive to at least one liability management proposal from the junior creditor group, these sources said.

In light of the asset sale agreement, the company is expected to tout the flexibility it has to use proceeds from the sale in any potential discussions with lenders. Proceeds are expected to land in 2025 if and when the deal closes, according to sources.

The secured-weighted lender group includes funds of Apollo Global Management and has been working with Gibson Dunn and PJT Partners. The unsecured-heavy creditor group has banded together with Akin Gump and Ducera, and includes funds of Franklin, CapRe and JPMorgan, according to sources.

CommScope has been working with Moelis as financial advisor and Alston & Bird as legal advisor, according to today’s announcement.

The deal is expected to close in the first half of 2025. Given there’s a 12-month reinvestment period outlined in the company’s credit agreement, the company can choose to reinvest the proceeds to make other acquisitions within that time frame, otherwise it will be required to pay down the term loans.

The company has a June 2025 maturity of $1.2bn in unsecured notes, which the proceeds cannot be used to pay down (unless the $3.2bn term loan is taken out and the credit agreement no longer governs the use of proceeds).

These near-dated bonds have jumped more than 10 points to above 90, according to 9fin data; without a holistic deal in place, they will have to be paid down at par. The long-dated unsecured bonds due 2027 are also up double-digit percentage points, though they still trade in the 60s. The term loan debt is up a point, according to sources.

According to sources, the Ducera/Akin group, holding mostly the 2025s and 2026s, made an offer that involved a three-year extension, and included capturing some discount, with an increase in the coupon and some tightened debt documents. However, the company did not engage with that proposal, these sources said.

9fin previously reported that investors have for months been expecting some sort of exchange offer and/or new money deal that would give them the opportunity to move up in the repayment line.

9fin’s Legal QuickTakes suggest that CommScope has ample covenant capacity for such maneuvers. 9fin’s distressed team will put out a liability management breakdown tomorrow examining the company’s options in light of the asset sale announcement.

CommScope Omnibus Bond Legal QuickTake here

A CommScope spokesman declined to comment. Advisors to the company and the creditors did not immediately respond to requests for comment.

Link: Table; Source: Company filings; 9fin analysis

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CommScope’s two creditor groups weigh potential allegiance after announcement of asset sale

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