Why the senior‑focused wireless carrier tapped preferred equity during a record‑sized private credit refinancing—and what it reveals about the 2025 deal landscape

Consumer Cellular, the Oregon‑based mobile virtual network operator best known for courting America’s retirees, shocked the debt markets on 21 May 2025 when it unveiled a financing package that pairs a USD 3.4 billion covenant‑lite term loan with USD 525 million of preferred equity. The capital stack, arranged by HPS Investment Partners and a consortium of private credit funds, refinances legacy loans and funds a dividend to majority owner GTCR.

How the deal was structured

PitchBook data describe the unitranche loan as one of the largest ever raised by a non‑rated US telecom company, eclipsing the restaurant franchise deals that previously dominated the asset class. The preferred equity slice sits above GTCR’s common equity but below the new debt, giving investors a hybrid return that combines a mid‑teens cash coupon with equity upside should an IPO follow.

Why Consumer Cellular needed fresh capital

Since GTCR acquired a majority stake for a reported USD 2.3 billion in 2020, Consumer Cellular has doubled its subscriber base to almost seven million and lifted EBITDA from USD 210 million to USD 527 million for the twelve months ended March 2025. Yet the growth was funded largely with floating‑rate loans that have become expensive as the Federal Reserve kept rates above five percent. By switching to a private credit solution and adding preferred equity, the company secures longer maturities and avoids public rating scrutiny.

Preferred equity’s appeal

For yield‑hungry investors, preferred equity offers downside protection: quarterly cash dividends plus the right to convert into common shares if Consumer Cellular lists or trades. For GTCR, the structure caps dilution while injecting half a billion dollars that can be recycled into marketing, network upgrades and a dividend estimated at USD 400 million.

What it means for the private credit boom

Private credit funds now manage more than USD 1.6 trillion globally. The Consumer Cellular deal underscores their willingness to underwrite multi‑billion‑dollar financings once dominated by leveraged‑loan desks on Wall Street. HPS, Ares and Blue Owl have each raised vehicles aimed specifically at large‑cap, investment‑grade‑adjacent borrowers—blurring the line between direct lending and traditional syndicated debt.

Regulatory and rating considerations

Because the preferred equity counts as quasi‑equity, leverage ratios reported to lenders fall below the six‑times ceiling that often triggers covenant concerns. Moody’s, which previously rated the company’s first‑lien term loan B3, is expected to withdraw that rating once the syndicated debt is repaid. Private credit backers argue that confidentiality allows them to take a longer‑term view of consumer‑churn risk—though critics warn that opacity may conceal systemic concentrations.

Strategic options for GTCR

GTCR has signalled that an IPO remains on the table after 2026, once Consumer Cellular completes a migration to 5G standalone service and expands into Medicare Advantage partnerships. The preferred equity holders negotiated a clause requiring either an IPO or a take‑private sale within five years, after which the dividend rate steps up by 400 basis points. That ticking clock aligns incentives but could pressure management if market windows close.

Sector context

US wireless remains a scale game: AT&T and Verizon hold over sixty percent of post‑paid subscriptions, while MVNOs such as Mint Mobile and Google Fi compete on price. Consumer Cellular differentiates through US‑based call centers and AARP endorsements, giving it industry‑leading Net Promoter Scores. Analysts at New Street Research estimate churn at just 1.8 percent per month, half the prepaid average, making the company attractive to credit investors despite its niche.

Risk factors

The financing assumes continued subscriber growth and stable spectrum‑leasing costs from AT&T and T‑Mobile. Should network‑access fees rise or seniors adopt smartphones more slowly than expected, free cash flow could lag projections. In a downside scenario, the preferred equity may stop cash pay and accrue PIK interest, raising effective leverage. Still, the loan‑to‑value ratio of roughly seven times EBITDA is in line with other large‑cap telecom LBOs.

Looking ahead

GTCR and Consumer Cellular plan to deploy up to USD 300 million of the proceeds toward marketing partnerships and a new customer‑care center in Phoenix. Management insists that expansion, not financial engineering, drove the transaction. Yet with private credit now shouldering both senior debt and preferred equity, the deal sets a precedent for hybrid structures that blur the classic leveraged‑buyout model.

Conclusion

Consumer Cellular’s USD 525 million preferred equity round highlights how 2025’s capital markets reward stable cash generators even amid high interest rates. For private equity sponsors, hybrid stacks widen the menu of liquidity options. For private credit funds, telecom infrastructure offers steady yields. And for the millions of seniors who rely on Consumer Cellular’s budget plans, the hope is that the influx of capital translates into better coverage, not higher bills.

Background: GTCR’s 2020 buyout

Consumer Cellular was founded in 1995 and sold a majority stake to Chicago‑based private equity firm GTCR for a reported USD 2.3 billion in 2020. That transaction laid the groundwork for today’s recapitalization, marking yet another chapter in the company’s evolution from niche MVNO to mainstream wireless challenger.

Sources

Bloomberg, HPS Leads Over USD 3 Billion Private Debt for Consumer Cellular, 21 May 2025

PitchBook, Consumer Cellular Sets USD 3.4 Billion Private Credit Loan, 24 May 2025

Private Equity Wire, HPS Leads USD 3.4 Billion Private Credit Consumer Cellular Deal, 22 May 2025

Stoel Rives LLP, Consumer Cellular Sold to Private Equity Firm GTCR for Reported USD 2.3 Billion, 2020