FUNDRAISING NEWS | September 24, 2024
The AI boom is driving a marked recovery in the debt market for telecommunications companies, significantly benefiting distressed debt investors, Bloomberg reported on September 24.
In the past month, the amount of distressed debt in the sector has shrunk by $18B, with existing fiber assets and high-speed connectivity becoming more valuable as demand for AI-driven infrastructure grows, according to Bloomberg. Telecom companies previously struggling with high leverage and rising borrowing costs are now seeing their debt prices rally as they emerge as critical players in the AI value chain.
“Several companies that were deemed to be over-leveraged are seeing their capital structures trade materially tighter because of their participation in the artificial intelligence value chain,” Randy Raisman, head of US opportunistic credit at Marathon Asset Management, told Bloomberg.
Distressed debt investors are benefiting from one of the most significant valuation shifts in recent years as AI makes existing fiber infrastructure more valuable for the data centers and other high-speed networks it relies upon. The sector's rebound is notable, according to Bloomberg, with telecoms now outperforming the overall high-yield bond index, despite a 13% default rate over the past year. In concert with rising capital markets, this development could also provide a lift to future financing for the sector.
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