What are the chances of CS going bankrupt? I know at our last meeting, Chuck said they do not see it happening… but why doesn’t Bloomberg and other sources are saying CS is on its way to bankruptcy with all the losses.
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But you guys have not mentioned BEAD & RDOF!!? Those are the lift rafts which should help CCS to recover. Selling NICS and ANS will leave a profitable CCS thanks to BEAD & RDOF. I still believe that the creditors would prefer to receive payments from CCS rather than waste money in a protracted legal battle where they are likely to get nothing back.
Yes, OWN is in trouble, but could be attractive to someone who doesn't care about high margin, and who see owning OWN, no pun intended, as a good fit to their existing business. Too bad that the USA relationship with China is bad, because previously, they would buy anything just to increase their presence within the USA market.
Another troubling thing. We may be trying to sell Ruckus and ANS, but our had must be weak. Everyone knows we are in distress and only selling b/c we have to, and so they can hardball us like crazy on the price. Plus acquisition debt is very expensive right now, putting more pressure on asset sale prices. And finally, who would buy ANS? Our big cable customers treat us like cr*p, no one is buying CMTS hardware anymore, and so our only good products are low margin amps and nodes. And while Ruckus has performed greatly lately, it's mostly because they are shipping backlog from the covid days when chips were in short supply. Ruckus revenue from wifi access points has to start falling soon -- the office market has completely cratered with no one building new office towers or renovating old ones. So I think all the talk about getting $4 billion for those assets is a pipe dream. Just imo.
The most common likely scenario is that CommScope will sell off the remaining stock parts of Arris to try and eliminate the dev as much as possible. I see CS return to the same company we were in 2018 before the merger.
One large question is OWN. They saw a 45% decline in Q3 making them them the lowest BU in terms of revenue. Given that, mobile companies have cut back 5G a significant amount, and AT&T singing an exclusive contract with Ericsson I think OWN could be in trouble.
Most of the CS products are commodity now, it has no leading edge technology and many competitors have products cheaper, better quality. Wireless carrier like T Mobile has device to get the 5G wireless to home Wifi, I am using it, get about 800m down for $50, good enough, not plan to pay more for Docsis 4 or 10. Investors never pay millions to deploy and dig ground at sub-urban areas for few customers, just use the wireless or satellite. A company with so many shut down facilities, selling off head-quarter etc, what do you think!? The Next Apple?! It is heading to bankrupt or selling into pieces, just a matter of time. To be honest, it is not just CS has financial issue, it could be our banks, gov and all in the same trouble. If the loans crisis (mortgage, car, student etc) comes, it will be BIG in history. God bless America!
Folks, if you were unfortunate to be one of the lenders to whom CS is indebted, what would you prefer?
- Negotiate a deal with CS where you stand a good chance of you recovering your capital, thanks to BEAD & RDOF and the sale of Ruckus and ANS?
- Fight with CS in courts where you stand to lose most if not all of your capital in the event of a bankruptcy?
Financial guys will not ki-l the goose who could go on to lay golden fibre eggs!
Remember this:
"CommScope's CEO Attends White House Event on Broadband Access for All. HICKORY, N.C., June 26, 2023--(BUSINESS WIRE)--Chuck Treadway, CEO of CommScope (NASDAQ: COMM), attended a White House event this morning to represent leaders in fiber-optic cable manufacturing."
BEAD & RDOF will save CS and CCS will become an attractive business to acquire once the other BUs are sold, or off-loaded in a similar manner to HN being given to Vantiva.
Yes, Kyle should be fired for not addressing the debt while interest rates were still low. However, for the sake of the remaining CS employees, let us hope that bankruptcy can be avoided and that BEAD & RDOF will enable CS to live to fight another day.
My take on the current situation is that HN is now off the books. $4B expected from the sale of Ruckus and ANS which leaves CCS and OWN. The debt will be halved, and the $100M cost savings will be used to pay the cost of refinancing the remainder of the debt. That is achievable. Achieving $100M savings in 1 quarter is pretty aggressive, and I believe that a lender has imposed that requirement. With the debt halved, Chuck will be able to make a huge profit on his recent stock purchases. Whatever folks might think of Chuck, he has no intentions of walking away empty handed after spending over $1M buying up CS stock over the past year. BEAD & RDOF will make CCS profitable and OWN should benefit from DOCSIS 4 roll out at which point they will both the be sold. That is the game plan here. I cannot see Chuck allowing the situation to deteriorate into wasting money in the courts. The first obstacle to overcome will be to find a buyer for Ruckus and ANS.
We probably aren't going bankrupt in the near term. We have cash in the bank plus a revolver we can draw on. But....we have a ~$1.3B note due in 2025 that we have to refinance soon, then 3 additional pieces of debt totaling about ~$4.6B coming due in 2026. That's a ton of debt, and it's all trading way below par, meaning the market doesn't expect we can pay it all off or refi it all. CS has lawyered up, and so have our bondholders and bank lenders. My guess is that right now we are negotiating some kind of big deal to sell some assets (most likely Ruckus and/or ANS) and use the cash to buy back a bunch of the debt at a discount and then also refi whatever is left. But any new refi debt we take on is going to be at much higher interest rates, so that will hurt. At the end of the day, the direction of the business is the wildcard. If we keep shrinking rev and profit, regardless of the debt deal we cut today, we may not be able to stay out of bankruptcy. But honestly, folks, bankruptcy wouldn't be a bad thing. We have a decent underlying business -- we are just choked by too much debt. It would stink for our current shareholders, but it would feel like untying a noose from the business. Chuckie and Carlyle, of course, don't want this b/c then they loose big. Chuckie, of course, has the IQ of a tumbleweed....as anyone who deals with him knows lol.
Is it possible that's been the plan for some time? Why else would you keep and reward C suite? Could it be that Carlyle will let it crash and burn and pick up the pieces they want and take it private again?
CS is done. Stick a fork in it.
Current CommScope Holding Probability Of Bankruptcy: Less than 42%
A significant improvement to the previous greater than 75% earlier in 2023.
I would imagine that Carlyle would not sit idly and watch their $1B investment in CS to evaporate. Further, with HN headcounts no longer on CS books can only be a positive, along with their commitment to achieving $100M cost savings in Q1/24 would serve to reduce the risk of bankruptcy.