Cogent Communications Details $750M Secured Refi Plan, Data Center Sale Talks at JPM Credit Conference

Core Viewpoint - Cogent Communications is implementing a $750 million secured refinancing plan and restructuring to enhance its financial position and collateral for lenders while targeting growth in its wavelength business Financial Structure and Debt - The borrower group has three tranches of debt: $623 million in capital/finance lease obligations, $600 million in secured debt, and $750 million in unsecured debt, with restrictions on secured leverage (no more than 4x) and total leverage (no more than 6x) [1] - Cogent has been a high-yield issuer since 2010, with a structure that includes Cogent Holdings above two subsidiaries: "Group" for operations and high-yield debt, and "Infrastructure" for asset-backed securitized IPv4 leasing with $380 million in ring-fenced debt [2] - The company is currently at 6.6x net leverage and has cut its dividend by 98% from $1.01 to $0.02 per share, with no material equity buybacks planned until leverage reaches 4x [10] Restructuring Plan - The restructuring involves four steps to refinance $750 million of unsecured debt with secured debt, improving the collateral position for bondholders [6][7] - The steps include moving IRU-related liabilities into a subsidiary, splitting leases by geography, selling North America/Western Europe leases to Infrastructure, and leasing back the fiber for 10 years [8] - The new $750 million secured debt will sit pari passu with existing 6.5% secured debt maturing in 2032, with a temporary extension of existing bonds by one year [9] Wavelength Business Growth - Cogent targets a $500 million run-rate in its wavelength business by mid-2028, despite generating approximately $40 million last year, citing a North American total addressable market of about $2 billion [4][15] - The company has expanded its targeted footprint from 800 to 1,096 data centers, delivering Waves to 518 sites and about 200 unique customers, with a year-over-year growth of 100% in the wavelength business [16] Data Center Sale Process - Cogent is in discussions to sell 10 data centers, with buyer interest reportedly exceeding $144 million, to enhance credit for the Group [5][12] - The sale is not required for refinancing, but proceeds will be committed to the Group, with cash trapped subject to restricted payment tests [11] - The primary gating item for the sale is confirmatory due diligence on power availability, with the buyer validating confirmations and conducting environmental work [13]