(Bloomberg) — Chris Stansbury found himself in an uncomfortable position at a Wall Street leveraged finance conference last year, where he was the center of attention for carrying out a controversial distressed-debt exchange. Creditors left out of the deal were not pleased, leading to tension in the room.
Despite the initial backlash, the deal orchestrated by Lumen CFO Stansbury has turned out to be one of the most successful distressed trades of the year. Diameter Capital Partners, a key player in the transaction, recognized the potential within Lumen’s debt-ridden situation and seized the opportunity to make a significant investment in Level 3 Communications, a subsidiary of Lumen.
As the deal unfolded, Diameter, along with other major players like Silver Point Capital, PGIM Fixed Income, and BlackRock Inc., negotiated an out-of-court agreement that extended Lumen’s maturities and provided much-needed fresh financing. The agreement resulted in substantial profits for those involved, including Diameter, which made it their largest wager at the beginning of the year.
The success of the deal not only benefited the creditors directly involved but also boosted Lumen’s position in the artificial intelligence sector, leading to a surge in the company’s bonds and loans.
While the deal may have sparked controversy and divided creditors, it ultimately bought Lumen more time and created value during a period of optimism surrounding artificial intelligence.
Despite initial skepticism from some investors, those who remained invested in the deal have reaped significant returns. Lumen’s evolution into a key player in AI technology has further solidified its position in the market, resulting in a positive outlook for the company and its debtholders.
While some critics view the deal as divisive and potentially harmful to market trust, Diameter and other negotiating creditors have defended their actions as necessary in the current market environment.
–With assistance from Eliza Ronalds-Hannon and Nishant Kumar.
(Updates with PGIM role in eighth paragraph)
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.