Bank of America Scrambles to Refinance Internet Provider Cogent

Bank of America Corp. has discussed providing investors of Cogent Communications Holdings Inc. with additional collateral for a new money raise for the internet provider, according to people familiar with the situation.

The new issuance may also be structured as a so-called pari plus transaction, which means that new lenders would get guarantees or an enhanced collateral package outside of the existing creditors group, the people familiar said, asking not to be identified discussing private information.

Bank of America has been shopping a potential first-lien bond deal to refinance $750 million of existing 7% unsecured notes maturing in June 2027, Bloomberg previously reported. Pricing discussions have now increased to 11% from 9.5% initially, said the people.

The deal is now being offered at discounted price of 96 cents on the dollar, they said, though terms of the deal have not been agreed yet and may change.

The possibility of a pari-plus structure combined with a challenging refinancing has dragged down the price of its existing debt load. Its unsecured note due in 2027 changed hands Friday at about 91 cents on the dollar, down from almost par on Aug. 7, according to pricing firm Trace.

Spokespeople for Bank of America and Cogent declined to comment.

During its second quarter earnings call in early August, Chief Executive Officer Dave Schaeffer said Cogent was “in the process of completing the refinancing of our 2027 notes which we anticipate will complete in the third quarter of this year.”

Cogent is in the process of selling data centers it acquired from T-Mobile in 2023 that used to be facilities of Sprint. In June, the sale of 10 data centers brought in about $225 million in proceeds, helping the company cut its leverage, Schaeffer said. Multiple parties are interested in the remaining former Sprint facilities for sale, he added.

As part of the refinancing, prospective investors are also seeking covenants on the use of proceeds from the data centers sales, the people familiar said.

The company listed around $3.1 billion of total liabilities in the second quarter, composed of debt and finance lease obligations, according to regulatory filings.

S&P Global Ratings cut Cogent to B- from B last month, citing its elevated leverage. The credit rater also highlighted that Cogent will no longer receive payments from T-Mobile related to the Sprint acquisition after 2027 — a reduction of about $100 million annually of the company’s earnings before interest, taxes, depreciation and amortization that “will have a material impact.”