Consolidated Communications is the latest provider to obtain financing based on asset-backed securitization (ABS). The company said today that the transaction consists of asset-backed term notes totaling $1.34 billion.
In addition, the company gained a commitment for a $500 million variable funding note facility. And an affiliate of the company entered into a $1.5 billion secured, revolving warehouse facility. Both facilities are subject to leverage tests and other customary conditions, the company said.
ABS deals emerged in telecom a few years ago, offering more favorable terms for the borrower in comparison with other options. In an ABS deal, funding is secured by a portion of a company’s assets.
In the recent telecom ABS deals, these assets have been all or a portion of the borrower’s fiber assets. Lenders view the revenue streams associated with these assets as low-risk and therefore are willing to offer more favorable terms, such as lower interest rates.
The new Consolidated Communications ABS deal is secured with “all existing and future fiber-enabled customers across certain states and the fiber optic and network infrastructure to support these customers.”
The proceeds from the transaction will be used to, “among other things, repay existing indebtedness, and for general corporate purposes, including the company’s growth initiatives and expansion of its fiber network,” Consolidated said in its announcement of the transaction.
Other telecom companies that have obtained ABS financing include Frontier, Ting, Zayo and others.
To Telecompetitor’s knowledge, Frontier is the only publicly held telecom company that has obtained ABS financing. Consolidated was publicly held until late 2024, when it went private via an acquisition by Searchlight Capital Partners and British Columbia Investment Management Corporation.
Morgan Stanley & Co. LLC was the sole structuring agent and lead left active bookrunner in the Consolidated Communications ABS deal.
