What is the intended use of the $425 million proceeds and how will it affect Lumen’s leverage ratios?

Intended use of the proceeds – Lumen’s subsidiary Level 3 Financing disclosed that the $425 million raised from the upsized 7.00 % First‑Lien Notes will be applied primarily to refinance existing senior debt and to fund “general corporate purposes,” which includes modest cap‑ex for network modernization and working‑capital needs. By replacing higher‑cost borrowings with a longer‑dated, fixed‑rate tranche, management aims to lower its weighted‑average interest expense and free up covenant headroom.

Impact on leverage ratios – Adding $425 million of senior debt will lift Lumen’s headline debt balance, but because the cash is earmarked for debt repayment the net increase in total leverage is limited. Assuming the proceeds retire a comparable amount of higher‑interest senior paper, the company’s Debt‑to‑EBITDA and Net‑Debt‑to‑EBITDA ratios should improve modestly (‑0.1 × to‑0.2 ×) once the transaction closes. The longer maturity (2034) also pushes the debt‑service schedule outward, which credit analysts typically view favorably, and it helps Lumen stay within its existing covenant thresholds.

Trading implications – The issuance was priced at a relatively tight spread to the Treasuries (≈350 bps), indicating strong demand and a market view that the refinancing will be accretive. In the equity market, the news has been neutral‑to‑positive, with Lumen trading near its 20‑day moving average and the 50‑day SMA providing support around $32. If you are short‑term focused, the note issuance may temporarily lift the stock on the back‑of‑the‑envelope credit‑improvement narrative; however, the modest impact on leverage means any upside is likely limited. A prudent play would be a small long position or a “buy‑the‑dip” if the price falls below the 20‑day MA, while keeping an eye on upcoming earnings and any updates to the debt‑repayment schedule that could further tighten leverage ratios.