Longleaf Partners Funds, Berkshire Hathaway and Legg Mason To Jointly Invest in Level 3
BROOMFIELD, Colo., July 8, 2002 - Level 3 Communications, Inc. (Nasdaq:LVLT), announced today that it has signed an agreement to sell $500 million aggregate principal amount of its 9% junior convertible subordinated notes due 2012 to three institutions: Longleaf Partners Funds, Berkshire Hathaway Inc., and Legg Mason, Inc. The transaction is expected to close today. Level 3 intends to use the net proceeds for general corporate purposes, including potential acquisitions relating to industry consolidation opportunities, capital expenditures and working capital.
"It is widely recognized that the telecommunications industry is going through a period of unprecedented turmoil," said James Q. Crowe, Level 3's chief executive officer. "At the same time, however, the ongoing shakeout is creating extraordinary opportunities, as telecommunications companies, their network assets and customer bases become available. We are fortunate to have both network management expertise and financial dry powder, which will allow us to continue pursuing opportunities that create value for our stockholders."
Longleaf Partners Funds (Partners Fund and Small-Cap Fund) is purchasing $300 million of the convertible notes; Berkshire Hathaway is purchasing $100 million; and Legg Mason is purchasing $100 million. The notes, which mature in 10 years, pay 9% cash interest. The notes are convertible, at the option of the holders, into common stock at any time at a conversion price of $3.41, subject to certain adjustments. The notes are convertible at the company's option into convertible preferred stock under certain conditions and circumstances. The convertible notes rank junior to substantially all of the company's existing indebtedness. In addition, all three institutions have indicated that they would consider possible additional investment in the company in the future, although neither the company nor the institutions have an obligation with respect to any future investment. Pro forma for the $500 million new investment, the company had a cash and marketable securities balance of approximately $1.5 billion at
June 30, 2002.
Walter Scott Jr., chairman of Level 3, said: "We are particularly pleased that Level 3 was able to secure additional investment of this magnitude given the constraints of today's capital markets. Perhaps more important is the reputation and stature of the investors who have chosen to partner with us. We look forward to working with Longleaf Partners Funds, Berkshire Hathaway and Legg Mason as we pursue the opportunities that lie before us."
O. Mason Hawkins, chairman and CEO of Southeastern Asset Management, adviser to Longleaf Partners Funds, said, "We invested in Level 3 to take advantage of consolidation opportunities in the telecommunications arena. We believe these opportunities are substantial. Level 3 is uniquely and competitively positioned, and its management team, led by Jim Crowe, is most able."
Warren Buffett, chairman of Berkshire Hathaway, issued the following comment on his company's investment in Level 3: "Liquid resources and strong financial backing are scarce and valuable assets in today's telecommunications world. Level 3 has both. Coupled with the management of Walter Scott and Jim Crowe, in whom I have great confidence, Level 3 is well equipped to seize important opportunities that are likely to develop in the communications industry."
Bill Miller, chief executive of Legg Mason Funds Management, noted that demand for communications services continues to grow at the same time that the number of service providers is shrinking. "Spending on communications services is non-discretionary," Miller said. "We believe more strongly than ever that Level 3 is emerging as one of the ultimate leaders, survivors and consolidators in the industry."
Level 3 will hold a conference call to discuss today's announcement on Monday, July 8, at 4:30 p.m. eastern time. Investors and analysts in the United States who want to join the call can dial 888-423-3276, 612-332-1020, or 612-332-0630. International callers should dial 612-288-0337. A live broadcast of the call can also be heard on Level 3's Web site at www.Level3.com.
About Level 3 Communications
Level 3 Communications, Inc. (NASDAQ: LVLT), an international communications company, operates one of the largest Internet backbones in the world, connecting 180 markets in 18 countries. The company serves a broad range of wholesale, enterprise and content customers with a comprehensive suite of services including: Internet Protocol (IP) services, broadband transport and infrastructure services, colocation services, voice and voice over IP services, content delivery and media distribution services. These services provide the building blocks to enable Level 3’s customers to meet their growing demands for advanced communications solutions. The company’s Web address is www.Level3.com.
"Level 3 Communications,” "Level 3," the red 3D brackets and the Level 3 Communications logo are registered service marks of Level 3 Communications, LLC in the United States and/or other countries. Level 3 services are provided by wholly owned subsidiaries of Level 3 Communications, Inc. Any other service, product or company names recited herein may be trademarks or service marks of their respective owners.
Forward-Looking Statement
Some of the statements that we make in this press release are forward looking in nature. These statements are based on management’s current expectations or beliefs. These forward looking statements are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside our control, which could cause actual events to differ materially from those expressed or implied by the statements. The most important factors that could prevent us from achieving our stated goals include, but are not limited to our ability to: successfully integrate acquisitions; increase the volume of traffic on our network; defend our intellectual property and proprietary rights; develop new products and services that meet customer demands and generate acceptable margins; successfully complete commercial testing of new technology and information systems to support new products and services; attract and retain qualified management and other personnel; and meet all of the terms and conditions of our debt obligations. Additional information concerning these and other important factors can be found within Level 3’s filings with the Securities and Exchange Commission. Statements in this press release should be evaluated in light of these important factors. Level 3 is under no obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.
