Moody's lowers Lumen

Moody's Investors Service said it downgraded Lumen Technologies, Inc.'s corporate family rating to Caa1 from B2 and its probability of default rating to Caa1-PD from B2-PD. The agency also cut Lumen's senior secured rating to Caa2 from B3, its senior unsecured rating to Caa3 from Caa1, Level 3 Financing, Inc.'s senior secured rating to B1 from Ba2, its senior unsecured rating to B3 from B1 and Qwest Corp.'s senior unsecured rating to B3 from B1. The company's speculative grade liquidity rating remains at SGL-3 reflecting adequate liquidity.

“The downgrades reflect the company's increasing financial risks and continued weak operating performance. In early 2025, Lumen will face around $1.8 billion of debt maturities and in 2027, the company will have an additional $9.4 billion of maturing debt. In addition, Lumen faces execution risks with continued operating and margin pressures, high capital intensity and negative free cash flow associated with the fiber buildout of its consumer footprint and renewed efforts to revitalize its enterprise business.

“Together these risks raise the possibility of distressed debt exchanges, especially given Lumen's weak equity valuation and low debt trading levels,” Moody’s said in a press release.

Recent news of Lumen's potential liabilities resulting from lead-sheathed cables and that a substantial percentage of its lenders retained financial and legal advisors are also concerns, the agency said.

The outlook remains negative.

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