Fri 12/18/2020 19:15 PM
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GTT Communications is in talks with a subset of its first lien lenders including PGIM, CIFC, Carlyle, Neuberger Berman, Fidelity Management and Ares to obtain a $250 million to $275 million super senior bridge loan, according to sources close to the matter. The five funds represent members of a first lien lender steering committee, including both dollar and euro lenders, spearheading the financing talks with the internet service provider. Continue reading for our Americas Core Credit team's analysis of the GTT super senior bridge loan and request a trial for access to the linked documents as well as our analysis and reporting on hundreds of other stressed, distressed and performing credits.

The new-money facility would likely come with restrictions on the ability to access and be in the form of a delayed draw, two of the sources said, adding the Virginia-based group does not need the full amount from the outset and would use the proceeds to tide it through until its proposed $2.02 billion sale of its infrastructure assets to Cube Telecom closes, some time in the first half of 2021.

Participation in the facility, which carries first-out privileges, in relation to existing loans would likely be extended only to the largest holders of the euro and dollar loans, plus a few large unsecured noteholders, notably the ad hoc bondholder group members, the sources said, adding that the short-term loan would pay “substantial” fees and margins.

PGIM holds $73.05 million and €12 million, CIFC $31.99 million, Carlyle $21.16 million and €38.68 million, Neuberger Berman $46 million and Ares $35.7 million and €14.4 million of U.S. and euro loans, Refinitiv’s LPC Collateral database shows. Other significant cross-holders include Anchorage with $73.3 million and €6.63 million and CSAM with $20.3 million and €19.5 million, according to the database.

The ad hoc group of unsecured noteholders is represented by Centerview and Latham & Watkins and comprises four institutions holding approximately 50% of the $575 million 7.875% notes maturing in 2024.

As talks continue to finalize the facility ahead of the extended forbearance expiration date of Dec. 28, lenders are digesting key takeaways from last week’s update call with the company including former CFO Steven Berns and his replacement, Donna Granato. GTT is required to hold update calls with lenders once every two weeks as detailed in the forbearance agreement.

News of Berns’ departure came as a negative surprise to the lenders as did GTT’s announcement it needed additional liquidity, the sources said. Berns’ explanation to the lenders that the job proved harder than he thought was unconvincing, given that he started his role at GTT in April after the pandemic began, the sources said.

In addition to taking questions regarding the CFO’s resignation, GTT, which has yet to file its second- and third-quarter financials, disclosed to lenders that it would not restate cash previously reported on its books but, related to future cash needs, acknowledged that its customers were beginning to be concerned about its liquidity, the sources said. The company said it would likely restate certain revenue items, potentially cost of goods sold, or COGS, sources added.

According to the sale agreement with Cube Telecom, the transaction was contingent on GTT receiving amendments or waivers from its lenders and noteholders by Oct. 28 relating to its inability to file timely financials, including its second- and third-quarter earnings reports. Regarding financials, GTT said that on Dec. 9, it received notices on behalf of requisite forbearing noteholders and required lenders consenting to an extension of the scheduled expiration time under each of the notes’ forbearance agreement and the credit facilities forbearance agreement, respectively, to Dec. 28 at 8 a.m. ET. The company disclosed that on Dec. 10 it also entered into a forbearance agreement extension with required revolving lenders and the agent to extend the forbearance to Dec. 28 as well.

GTT said it does not expect to be able to file its second-quarter report by the new expiration time as a result of its previously disclosed review of certain accounting issues, which is continuing, nor can it provide an estimate of when it will be able to file the report.

Sources were surprised, in light of the forbearance agreement reached with noteholders, that on Dec. 7 GTT received a notice of default from the notes’ indenture trustee related to the late financials, given that the unsecured noteholders would receive minimal recoveries in a restructuring. GTT said that under the indenture, failure to comply with the reporting covenant for a period of 60 days after the notice, or Feb. 5, 2021, would constitute an event of default.

Levels on the euro tranche were softer at 88.75 bid this week and on the dollar at 77/79, unchanged from last week, according to a third source.

GTT did not respond to an email requesting comment.

--Adelene Lee, Alexander Saeedy
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