After the market closed, Level 3 Communications (NYSE:LVLT, news, filings) announced plans to offer $175M in convertible senior notes due 2016. The financing is expected to be completed by the end of September, and includes the option for another $26.25M to cover over-allotments. It has been 9 months since Level 3 last accessed the credit markets, so I suppose they were due. What will they be doing with this new funding? It's tempting to see this as Level 3 preparing to enter the M&A frenzy that has been growing all year, however in this case I tend to doubt it.
According to the PR, it is for the usual 'general corporate purposes', including working capital, capex, and the potential refinancing of the $5.25% converts that come due in 15 months. I suspect that the money is mostly aimed at that last bit, and that they are raising it now rather than later because it's available. They will probably redeem those bonds over the winter, and in the meantime they will have extra flexibility on the balance sheet for whatever might come up.
I believe that the kind of M&A Level 3 would have in mind would be larger than this, but that to get there they need to get themselves back in a position of strength with solidly growing core revenues. This move is just balance sheet maintenance.
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