Bank of America is approaching investors about refinancing Cogent Communications Holdings Inc.'s near-term debt, which matures in less than a year, people with knowledge of the discussions say.
Refinancing Details
According to the people, who requested anonymity because the talks are private, the lender is marketing a possible $750 million first-lien bond offering to pay off the company's current 7% unsecured notes due June 2027. Pricing has been discussed at an interest rate of at least 9.5%, although final terms could shift. Neither Cogent nor Bank of America would comment.
Regulatory filings showed roughly $3.1 billion in total liabilities, including debt and finance leases. Trace data on Friday showed Cogent's $450 million unsecured notes maturing in 2027 trading at 98.5 cents on the dollar.
The stock closed Monday at $10.75, far below the $84.06 high it reached in the prior year.
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CEO Commentary
Chief Executive Officer Dave Schaeffer said Cogent is advancing on its 2027 maturities, and the data-center sales have cut leverage. During the second-quarter earnings call, Schaeffer said the refinancing should be completed in the third quarter.
The facilities came from Sprint, a business Cogent acquired from T-Mobile in 2023, and were converted into data centers. Cogent sold 10 of them in June for about $225 million, with "multiple parties interested in the remaining former Sprint facilities that we have put up for sale," he said.
Cogent also said it is cutting capital lease payments and growing its wavelength business. Second-quarter service revenue decreased to $235.6 million, compared with $239.2 million in the preceding quarter.
The refinancing is a key step for Cogent as it faces debt maturities in 2027. The company's bonds have been trading below par, and S&P cut its rating because of high leverage, also noting the expected loss of T-Mobile payments after 2027. Cogent has used asset sales and discounted debt buybacks to reduce obligations while working on the new financing.
Investor attention has focused on Cogent's ability to refinance before the 7% notes come due, especially after the S&P downgrade.
Debt Purchases and Credit Rating
According to a press release, Cogent bought $20.4 million of its 2032 secured notes in the secondary market during the second quarter at prices below par, and then purchased an additional $118.4 million in July at a discounted price.
Last week, S&P Global Ratings lowered Cogent's rating to B- from B because of high leverage. S&P also noted that T-Mobile payments tied to the Sprint acquisition will stop after 2027, resulting in an annual loss of about $100 million, which the rater said "will have a material impact."
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