Southeastern Asset Management, Six Other Institutional Investors
Agree To Buy 10% Convertible Senior Notes
BROOMFIELD, Colo., February 22, 2005 – Level 3 Communications, Inc. (NASDAQ:LVLT) announced today that it has reached agreements to sell $880 million aggregate principal amount of 10% convertible senior notes due 2011.
The following institutional investors have agreed to buy notes, either on behalf of their advisory clients, for the account of their affiliates or for their own account: Southeastern Asset Management; Davis Selected Advisers, L.P.; Fairfax Financial Holdings; Legg Mason Opportunity Trust; Markel Corporation; MSD Capital, L.P.; and The Torray Companies. The principal amount of debt each institution has agreed to purchase, subject to customary closing conditions, is set forth in the following table.
| Institutional investor | Proposed purchase amount |
| Southeastern Asset Management | $400 million |
| Davis Selected Advisers | $100 million |
| Fairfax Financial Holdings | $100 million |
| Legg Mason Opportunity Trust | $100 million |
| Markel Corporation | $30 million |
| MSD Capital, L.P. | $100 million |
| The Torray Companies | $50 million |
Legg Mason Opportunity Trust has the right to terminate its commitment if, after good faith inquiry, it is determined that the provisions of Section 17 of the Investment Company Act of 1940 prevent its participation. If this investor exercises its termination right, the aggregate principal amount of the notes sold would be $780 million. The company expects the Legg Mason Opportunity Trust’s determination will be made within approximately one week.
Level 3 intends to use the net proceeds from the offering for general corporate purposes, including possible acquisitions, working capital, capital expenditures, debt refinancings and debt repurchases. The company expects offering expenses of approximately $2 million.
“Telecommunications is going through a period of unprecedented consolidation, one that we expect will generate real opportunities for Level 3,” said James Q. Crowe, Level 3’s chief executive officer. “In such an environment, strong financial support and access to capital are of critical importance. We’re pleased to have signed these agreements, as we believe they reflect a fundamental level of confidence in the company, our business plan and our competitive position within the industry.”
The notes would mature in 2011 and pay 10 percent annual cash interest. After January 1, 2007, the notes would be convertible, at the option of the holders, into common stock at a conversion price of $3.60. The convertible notes would rank pari passu with all of the company’s senior unsecured indebtedness. Upon completion of the offering, and assuming that all investors participate, the company would have a pro forma cash and marketable securities balance of approximately $1.66 billion at December 31, 2004.
“The institutions participating in this offering represent some of the nation’s most successful investors,” said
Level 3 Chairman Walter Scott Jr. “We believe this proposed offering is in the best interests of all stockholders, and we look forward to a successful completion of the transaction.”
O. Mason Hawkins, chairman and chief executive of Southeastern Asset Management, said: “Over the past two years, despite challenging industry dynamics, Level 3 has established itself as a key provider of communications services to companies all over the world. The company has also succeeded as an industry consolidator through its acquisition of Genuity and other telecom assets. We believe the company is well positioned to capitalize on additional opportunities as they arise. We are pleased to participate with Davis Selected Advisers, Fairfax Financial Holdings, Legg Mason Opportunity Trust, Markel Corporation, MSD Capital, and The Torray Companies in making this investment.”
Completion of the transaction may require the approval of Level 3 stockholders under the rules of the Nasdaq National Market. A final determination as to whether such approval is required will be made after further consultation with Nasdaq. If stockholder approval is required, and the company’s stockholders fail to approve the transaction, the investors will receive their pro rata share of a termination fee payable by the company totaling 3 percent of the total amount of the offering.
If Level 3 is required to hold a special meeting of stockholders to consider the proposed transaction, it is anticipated that the meeting will take place as soon as reasonably practicable. If a special meeting of stockholders is not required, the company anticipates closing the transaction by the end of the first quarter 2005.
A shelf registration statement relating to the notes has been declared effective by the Securities and Exchange Commission. Offers and sales of the notes were made by the related prospectus and prospectus supplement.
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.
