Level 3 Back at the Well (LVLT)

The effort of raising cash by selling debt at some companies just never seems to end.  Level 3 Communications, Inc. (NASDAQ: LVLT) is one of those companies.  The company announced that its Level 3 Financing unit has entered into an agreement to sell $640 million in aggregate principal amount of Senior Notes after disclosing its intent to raise capital this week.  This is not exactly cheap money, even if it is lowering its implied interest expense.  The terms call for a 10% coupon rate due in 2018 at a price of 97.982% of PAR value.  These notes are also being sold in a private offering to qualified institutional buyers, which means these are 144A (private placement) and Reg. S (non-US investors) securities.

The company noted that the use of funds will be for funding Level 3 Financing’s purchase of its 12.25% Senior Notes due in 2013 under a concurrent tender offer and consent solicitation.  The closing of this offering is also conditioned upon the valid tendering and acceptance by Level 3 Financing of a minimum aggregate principal amount of notes and other conditions.

The offering is expected to be completed on Jan. 20, 2010, subject to the satisfaction or waiver of closing conditions.  The good news about this offering is that it brings down the interest expenses and pushes out the maturity schedule.  The bad news is that this is still a version of debt poker that has to be played by so many companies which have high leverage of debt to equity.

This pricing follows yesterday’s announcement of reaffirming Adjusted EBITDA of $900 million to $950 million for the full year 2009.  Shares were up over 2% yesterday at $1.65 on the pre-pricing news, and its 52-week trading range is $0.60 to $1.77.

JON C. OGG