Level 3 Opens the Year With a Refi

January 5th, 2010 by · 7 Comments

Level 3 Communications (NYSE:LVLT, news, filings) this morning announced that it plans to issue $640M in new senior notes due 2018 to qualified institutional buyers.  They will use the money to tender for their 12.25% debt due 2013, of which they have $550M outstanding.  There will be some left over, even if they were to get all of the 12.25%'s.  It is a while yet before 2013 rolls around, but the company has a large pile of debt due that year and is clearly not going to wait to chip away at it.  Early refi action has been their policy for so many years now that this move probably doesn't surprise anyone.  The amount the debt markets are apparently willing to let them refinance, however, is quite large and therefore opens the year on a hopeful note in the credit markets.  I am curious what this offering will price at.

Simultaneously, Level 3 reiterated Q4 and full year 2009 guidance with the following quote:

The company is confirming its previously issued expectation of Consolidated Adjusted EBITDA(1) of $900 million to $950 million for the full year 2009. The company also expects to be approximately Free Cash Flow neutral for 2009 in the aggregate. In addition, for the fourth quarter 2009, the company continues to expect improvement in the sequential performance of Core Network Services revenue. Consolidated Adjusted EBITDA is expected to increase in the fourth quarter compared to the company's results in the third quarter.

Nothing particularly surprising in there, the question that hangs in the balance is what 2010 will look like - we'll probably have to wait another 4 weeks or more for that information.

More than anyone in the sector, Level 3 needs 2010 to be year of revenue growth.  Three rebuilding years in a row is enough, don't you think?  Now, with little remaining legacy revenues, rebuilt provisioning and back-office systems, a lean workforce, and a recovering economy, it's time to find a way to make it happen.

It does like they're going to hit the ground running anyway.  Check out the intro to this job opening they have listed:

It’s the new year and its time to take your career to the next level. In 2010 Level 3 will be expanding its sales force across the US by over 600 reps. We are looking for the top hunters in each of our major markets to help deliver our message. Specifically we are looking for 2 top sales reps in the Louisville, KY market.

600? That's some pretty good hiring - but this is not a PR so I'm taking it with a grain of salt for now.  Louisville?   That means we're talking about the Business Markets group and the local initiatives, at least in part.

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Categories: Financials · Internet Backbones · Metro fiber

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7 Comments So Far


  • The_highwayman says:

    Rob,
    YAWN…..rinse and repeat….again…

    It’s just another year at LVLT, that starts with a refi to cover the fact they cannot grow revs, so lets play refi the debt again and hope something happens…

    they expanded by 500 reps and remind of that every 3 months, but it never amounts to much in the numbers column…

    adding over an extra 100 is going do what exactly?

    I am cynical and probably harsh regarding this, but let’s face it, every year the start with big promises and refi’s to get debt pushed….it seems to me the only reason they push debt out is because they cannot see organic rev growth coming….

    maybe 10 is different, but honestly this smells more like SSDY!(same strategy different year)

    wake me up when business plan 1,392 actually produces something more than refi’s, debt pushbacks, addition of sales reps, and qtryly calls of grandeur so bright we all need to wear shades…

    Money talks and everything else walks…

  • da says:

    Typical LVLT MO – announce mediocre earnings, (but investors expecting worse, so this is good news!), take advantage of a crazy bond market and postpone day of reckoning for a few more years. Then issue optimistic 2010 guidance to gullible investors and proceed to massively disappoint as year progresses.

    Wash, rinse, repeat….

  • Rob Powell says:

    I don’t know if 2010 will be different for Level 3, events will have to play out a bit further before we can say. Certainly skepticism is the healthiest route right now, but I do hope they find their footing and soon.

  • fanfare says:

    Boy, it is hard not to be skeptic of management. We’ve hoped for years that the bandwidth drain would turn into revs, only to stumble on some other issue. Thing is, and I know we’ve said this before but, they are out of excuses now, and it really does look like all the bandwidth that is getting eaten up is finally getting to LVLT’s market. We’ve got edge MSO’s crying about network strain due to all the video online; those who access truncs from old school backbones like VZ, T, etc have no choice but to hop on board. They can’t keep capping all their customers, they’ll eventually be replaced. Is this the year? Who knows, but if it isn’t it sure is one step closer. We may not see a windfall, but small improvement is better than none, and if revs improve enough to get just enough growth needed, we will get there eventually. After all, does anyone really not believe that we will usher in a new era of unlimited bandwidth for everyone? It’s a major disruptive market for bandwidth intensive apps, does anyone think we will go back to an economy based on automobiles? We can grumble, but in the end if we are not on the bandwith highway, we will smack our foreheads and say “I knew it, how could I not have bought in”.

  • carlk says:

    I would just say to the skeptics that, Viva La (3) Network!

    It must live, even if we die squawking about why it isn’t where our perception of operating metrics tied to Wall Street scoundrels haven’t been.

    Remember The Crowe, “Money is never a problem for (3).”

    Buy the buy boys and girls, or shut up! 🙂

  • Alfred J. Beljan says:

    <> – this reads that LVLT is hiring over 600 NEW representatives which is one hell-of-a-leap if true as they presently have some 500 +/- on the payroll now…Is the Unity program really ready to handle such a projected increase in business for which it was originally built??? is it now time to ask O’Hara ro return as Preident???

  • Justin says:

    few articles you guys might be interested in. Any other good rumors on these now with LVLT looking to restructure debt again and looking to fork over that extra 9 million to save a few months?

    Q
    http://telephonyonline.com/commentary/qwest-ld-network-0106/

    S
    http://online.wsj.com/article/BT-CO-20100106-708261.html?mod=WSJ_latestheadlines

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