Level 3's Long-Term Debt Reduced by $457 Million
Notes Converted Into 161 Million Shares
BROOMFIELD, Colo., June 19, 2003 - Level 3 Communications, Inc. (Nasdaq:LVLT) announced today that Longleaf Partners Funds, Berkshire Hathaway Inc., and Legg Mason, Inc. have converted all of their outstanding 9% junior convertible subordinated notes due 2012 into shares of Level 3 common stock.
Level 3 raised $500 million from the three institutional investors last year, in part to pursue acquisition opportunities in the communications industry.
The conversion reduces Level 3's long-term debt by $457 million and generates cash interest savings for the company of approximately $41 million per year. In connection with the conversion, Level 3 is issuing approximately 161 million shares of Level 3 common stock in aggregate to the three investors. Of the original $500 million, $43 million had previously been converted.
"The investment in Level 3 by Longleaf Partners, Berkshire Hathaway and Legg Mason has helped position us as a high quality, financially stable partner to our customers," said James Q. Crowe, Level 3's chief executive officer. "We are pleased they have agreed to convert these debt holdings into Level 3 equity, and look forward to our continuing relationship."
O. Mason Hawkins, chairman and chief executive officer of Southeastern Asset Management, adviser to Longleaf Partners Funds, said, "We continue to believe Level 3 is well positioned to take advantage of consolidation opportunities in the telecommunications arena. The company continues to strengthen its balance sheet and position itself as a leader in the communication industry."
Level 3 announced the original investment on July 8, 2002. Longleaf Partners Funds purchased $300 million of the junior convertible subordinated notes; Berkshire Hathaway purchased $100 million; and Legg Mason purchased $100 million. The notes, which would have matured in 2012 and were non-callable until 2007, paid 9% cash interest. The notes were convertible at the option of the holders into approximately 147 million shares of Level 3 common stock at any time at a conversion price of $3.41, subject to certain adjustments.
As previously disclosed, $43 million of the notes were converted into approximately 13 million shares prior to today's transaction. The 161 million shares being issued under the transaction announced today includes a premium of 27 million shares to induce the conversion of the notes at this time.
"This transaction is consistent with our previously announced financial strategies," said Sunit S. Patel,
Level 3's chief financial officer. "It allows us to further de-leverage our balance sheet and reduce interest payments, while increasing the equity capitalization of the company."
At March 31, 2003, Level 3 had $6.3 billion of long-term indebtedness, which included the current portion of long-term debt. On a pro-forma basis for this conversion, Level 3 had long-term indebtedness of approximately $5.8 billion and approximately 623 million outstanding shares of common stock.
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.
