Level 3 Goes Off the Beaten Path in Florida, Exchanges Debt

January 24th, 2011 by · 6 Comments

More of those stimulus funds are being put to work finally.  Today Level 3 Communications (NYSE:LVLT, news, filings) won a bit of that business from the North Florida Broadband Authority with a five year contract.  The NFBA hopes to expand broadband coverage across 14 under-served counties fom south and west of Jacksonville on to the coast of the Gulf of Mexico.  They won this award back in February for wireless broadband and middle mile connectivity, and are now building out the capacity.  But such awards do not exist in a vacuum and hooking up the fiber the build to the rest of the internet is of course part of the deal and where Level 3 comes in.

Level 3, for its part, will be providing several services:

  • Two 1Gbps wavelengths each in four rural markets, via their Extended On-Net service
  • High speed IP services out of Tampa and Orlando
  • Colocation space in Tampa and Orlando
  • Help build out four other ILA sites

Level 3 has an extensive regional presence in Florida, much of which came from two of its metro acquisitions back in 2006: Progress Telecom and Telcove.  However, those assets didn’t extend into this region, nor does much other competitive metro and regional fiber that I know of, which is I suppose why these counties are underserved.  I expect the assets they are using for this lie along the original Level 3 fiber build.

One might have expected a regional provider like FPL Fibernet or Southern Light Fiber didn’t pick this one up, but perhaps all the NFBA just needed that help along the backbone and the Level 3 ILA sites were in the right place at the right time.

Meanwhile, Level 3 also refinanced another pile of debt.  This time, they took out the 9% converts due 2013, but not with cash.  Instead, they exchanged debt for debt, replacing $295M in 9% converts with $300M more of those 11.875% senior notes.  They just keep chipping away at the next debt wall.  Well, it’s more like shoveling a path through the snow while throwing it forward.  What they need is a snowblower (revenue growth would do it…)

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Categories: Internet Backbones

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6 Comments So Far

  • Anonymous says:

    Do we know who the institutional investor was? SEAM & Fairfax the most likely but wouldn’t Dan Fuss also be in the running here?

  • Steve Walters says:

    we’ve all seen this movie before and it’s not a happy ending.. quick revenue growth is the only thing that will save Level 3 from Bankruptcy unfortunately their management team is inept.. it’s a bunch of ex BT and other big company guys who are just holding on for dear life.. there is zero creative thinking going on here just the “sell more” by hiring more approach — isn’t this what bankrupted most telcos/CLEC’s in the past? The transformation to “enterprise” provider can’t happen because you need capital to develop an enterprise portfolio.. and they have none — oops. Rip the bandaid off and stop peeling it off slowly, get rid of the people that put them in this situation and run it like a real business.

  • B Ebb says:

    I read thru the North Florida operator website, this looks like a sham to take money from gov grants to enrich a few local cronies. I hope they investigate this….

  • carlk says:

    (3) is stuck on band-aids, and band-aids are stuck on (3)!

    4. $294,732,000 aggregate principal amount of Notes is held by a trust all of the ownership interests of which are held by subsidiaries of Fairfax Financial Holdings Limited.


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