(Bloomberg) -- Lumen Technologies Inc. debt rallied alongside a meteoric rise in the company’s stock after it announced higher demand for its services as a result of the artificial intelligence boom.
The telecommunications company’s 4 per cent bond maturing in 2027 rose 7.5 points on Tuesday to 72 cents on the dollar, according to Trace bond trading data. Notes tied to its Level 3 unit due 2028 jumped 10.5 points to 67.5 cents on the dollar the same day.
Lumen’s shares shot higher in recent days, recording a record one-day jump Tuesday and continuing their gains Wednesday.
The company late Monday said it secured US$5 billion in new business and is in talks for another $7 billion in sales driven by AI demand. It raised its forecast for free cash flow for the year to $1 billion to $1.2 billion, up from an expected $100 million to $300 million in earnings released on Tuesday.
It’s a remarkable turn for a company with a sizable debt load that exhibited signs of distress in recent years. Lumen undertook a controversial restructuring earlier this year to deal with maturities and raise fresh financing that angered lenders left out of the deal.
Previously: Lumen Inks Restructuring Deal With Expanded Creditor Group
The new business could solve liquidity needs for the company, but debt investors should maintain skepticism with revenue not expected to grow until 2027, CreditSights analyst Davis Hebert wrote in a note Wednesday.
“Lumen offered a lot of blue sky commentary about AI,” Hebert said in a phone interview. “They clearly have a nice recipe for a hot momentum trade.”
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