For a while there it seemed like everyone was accessing the credit markets except the one company that always does. But at last Level 3 Communications (NYSE:LVLT, news, filings) showed up, announcing today an agreement to sell $275M in convertible notes due 2015. The new notes will bear interest at 7% and be convertible into common stock at $1.80. They already issued $200M of notes just like these in June of this year.
Another $275M isn't all that much compared to recent activity by telecoms in the credit markets, but this deal is carefully aimed at closing off worries about the company's maturities through 2012. The company had $630M in unrestricted cash and equivalents at the end of the 2nd quarter, and they should generate $50-100M in cash in the second half according to guidance. Of their maturities, $55M was paid off a few weeks ago, another $168M is due in 2010, and then $505M in 2011 and $306M in 2012. This new capital gives them the cash to get all the way through 2011 and well into 2012 in the event the credit markets freeze over again and free cash flow remains iffy. If they generate just a little cash, they're OK until 2013.
That should stabilize their balance sheet enough for now, which the company said in recent investor presentations remained its top priority. So now maybe they can move onto their next priority, which hopefully involves taking the hammerlock off of capital expenditures and growing revenue again. Organic revenue growth would solve so many problems for them, and while the economy isn't exactly humming yet there is in fact money to be made in bandwidth right now. We'll know how that is going in about 4 weeks.
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