Lumen Technologies Inc

Current report

We have a highly complex debt structure, which could impact the rights of our investors.

Current report

Lumen Technologies, Inc. and various of its subsidiaries owe substantial sums pursuant to various debt and financing arrangements, certain of which are guaranteed by other principal subsidiaries. Over two-thirds of the debt of Lumen Technologies, Inc. is guaranteed by certain of its principal domestic subsidiaries, some of which have pledged substantially all of their assets (including certain of their respective subsidiaries) to secure their guarantees. The remainder of the debt of Lumen Technologies, Inc. is neither guaranteed nor secured. Over three-quarters of the debt of Level 3 Financing, Inc. is (i) secured by a pledge of substantially all of its assets and (ii) guaranteed on a secured basis by certain of its affiliates. The remainder of the debt of Level 3 Financing, Inc. is not secured by any of its assets, but is guaranteed on an unsecured basis by certain of its affiliates. As of the date of this quarterly report, substantial amounts of debt are also owed by two direct or indirect subsidiaries of Qwest Communications International, Inc. Most of the over 200 subsidiaries of Lumen Technologies, Inc. have neither borrowed money nor guaranteed any of the debt of Lumen Technologies, Inc. or its affiliates. As such, investors in our consolidated debt instruments should be aware that (i) determining the priority of their rights as creditors is a complex matter which is substantially dependent upon the assets and earning power of the entities that issued or guaranteed (if any) the applicable debt and (ii) such debt is structurally subordinated to all liabilities of the non-guarantor subsidiaries of Lumen Technologies, Inc. to the extent of the value of those subsidiaries that are obligors.

Current report

As previously disclosed in the periodic reports for our subsidiaries Level 3 Parent, LLC and Qwest Corporation, Lumen Technologies, Inc. also enters into debt arrangements with its subsidiaries from time to time. Any such intercompany transactions with its consolidated subsidiaries are eliminated in accordance with GAAP. For instance, at June 30, 2024, Lumen Technologies, Inc. owed approximately $2.7 billion to Level 3 Financing, Inc., (i) $1.2 billion of which was owed under a secured $1.2 billion revolving loan agreement and (ii) $1.5 billion of which was owed under an unsecured $1.825 billion revolving loan agreement. Qwest Corporation is also currently permitted to borrow up to $2.0 billion from a subsidiary of Lumen Technologies, Inc. under a revolving promissory note, but no amounts were outstanding thereunder at June 30, 2024. Lumen Technologies, Inc.’s debt arrangements with its subsidiaries may be revised from time to time, including to increase or decrease the amount thereof.

Previous report

We may not realize some or all of the anticipated benefits from completing our debt transactions on March 22, 2024.

Previous report

On March 22, 2024, we completed transactions contemplated under our amended and restated transaction support agreement dated as of January 22, 2024, including extending the maturities of a substantial portion of our near-term debt obligations, obtaining new credit facilities and raising $1.325 billion in new debt capital. In connection with announcing the closing of these transactions, we indicated that they would provide us with additional time to transform our operations and improve our financial performance.

Previous report

In completing these transactions, we incurred substantial transaction expenses, agreed to pay higher levels of interest and committed to more restrictive debt covenants, which collectively could have important consequences, including (i) limiting our ability to obtain additional financing to fund future debt maturities, working capital, capital expenditures, acquisitions or other general corporate requirements, and increasing our cost of borrowing; (ii) requiring a substantial portion of our cash flows to be dedicated to payments on our obligations instead of for other purposes; and (iii) various other potentially adverse consequences of carrying significant debt, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023. Moreover, the extension of our debt maturities may not afford us a sufficient amount of time to implement our transformation plans. For all these reasons and more, we may not realize some or all of the benefits we anticipate receiving from completing our March 22, 2024 transactions.

Previous report

Our pending proposal to implement a reverse stock split may entail certain risks or disadvantages.

Previous report

In our proxy statement dated April 5, 2024 that we filed the same date with the SEC (the “2024 Proxy Statement”), we submitted to our shareholders a proposal to grant our Board discretionary authority to implement a reverse stock split, which we expect, absent other factors, would proportionately increase the per share market price of our common stock upon implementation.

Previous report

We cannot assure you that this proposal will be approved by our shareholders, or, if approved, will be implemented or have the effects expected by us. Any such reverse stock split implemented by us could decrease the liquidity of our common stock, result in higher trading costs, or have certain other potentially negative impacts, all of which are described in detail in our 2024 Proxy Statement.