⚡️Update: GTT Communications Inc. ($GTT)⚡️

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Continuing our prior reporting on GTT Communications Inc., it seems safe to say that things appear a bit uncertain.

On March 8th, Bloomberg News reported that GTT had entered into bankruptcy negotiations with its creditors:

“GTT Communications Inc. has started formal talks with creditors around a restructuring plan that would see its unsecured debt holders take ownership of the telecommunications company through a bankruptcy filing. McLean, Virginia-based GTT is presenting creditors a proposal on Monday that would hand term loan holders a large cash payment from the $2.15 billion sale of its infrastructure unit, according to people with knowledge of the matter, who asked not to be identified discussing confidential negotiations.

Lenders would also get new debt with a coupon in the 7% to 9% range and a portion of the reorganized equity. GTT’s unsecured creditors would receive the majority of the new equity under the proposal, becoming the owners of the reorganized company, the people said. Lenders and creditors are becoming restricted from trading in anticipation of the formal talks, the people said. Negotiations are in the early stages and the terms could change, they added.”

For weeks, the market has been anticipating an update on either the infrastructure asset sale process or fundamentals (or both). On March 13, GTT essentially signaled that the market will have to wait a little longer. In an SEC filing, GTT notified the market that its YE 2020 10-K would be delayed; management outlined a host of new accounting and reporting issues as far back as 2017. If this sounds like déjà vu, it is: accounting issues first emerged in September 2020 during the diligence phase of the asset sale process.

Per Bloomberg, GTT “had promised to deliver a deleveraging plan by March 8 and faces a March 31 deadline to reach an agreement with its creditors.” Well — 🗓 checks calendar 🗓 — it’s March 31 and there’s officially no agreement. Instead, there’s yet another forbearance extension (which, we suppose, is an agreement of sorts) through April 15. In connection with the extension, GTT agreed to pay the fees and expenses of lender and agent advisors.

The stock has gotten pummeled since our initial report; it is currently trading at 1/3 the price it was back in late October 2020 (now around $1.85/share).

Similarly, the $575mm 7.875% Unsecured Notes due 2024 were trading around 47 cents on the dollar then and are languishing now in the high teens, though meaningfully up off of March 12 lows (as of 3/30/21 it was at 17 cents on the dollar versus 5 cents earlier in the month). On the other hand, the company’s term loan was one of last week’s biggest winners, ending last week up 2.3% around 81 cents on the dollar.

Whatever happens, one thing is clear: GTT’s broken roll-up story is an incredible fall from grace for a company that promised so much.