Liberty Puerto Rico Creditors Form Second Group Tapping Advisers

A second ad hoc group of Liberty Puerto Rico's revolving credit facility holders has engaged Guggenheim Partners and Cleary Gottlieb Steen & Hamilton as financial and legal advisors, respectively. This development comes as the cable and mobile provider's parent company considers a potential separation, signaling heightened creditor focus on protecting interests amidst possible structural changes or financial considerations.

Analysis

The formation of a second ad hoc group of creditors holding Liberty Puerto Rico's revolving credit facility, represented by top-tier advisors Guggenheim Partners and Cleary Gottlieb, signals a significant development in the credit's landscape. This move is a direct response to the parent company's consideration of a potential separation of the asset, a corporate action that could materially alter the debt's structure and security. The existence of two distinct creditor groups suggests a potential fragmentation of interests among lenders, which could complicate negotiations and indicates that creditors are proactively positioning themselves to influence the terms of any transaction. This defensive organization underscores the perceived risks associated with the separation, as lenders seek to protect their investments from potential credit dilution or unfavorable changes to covenants. The situation introduces a layer of uncertainty and a higher probability of complex, multi-party negotiations surrounding the future of the company's capital structure.

Key Decisions for Investors

• Investors holding Liberty Puerto Rico debt should closely monitor the objectives of the two distinct creditor groups, as their alignment could be crucial in future negotiations.
• Given the potential for a material corporate restructuring, credit holders must re-evaluate their exposure and assess how a separation could impact covenants, collateral, and the overall credit profile of the obligor.
• The engagement of prominent legal and financial advisors signals that creditors are preparing for complex negotiations, so investors should anticipate heightened volatility in the debt and prepare for various scenarios, including potential amendments or a broader restructuring.