Improves Company's Ability to Pursue Acquisition Opportunities
And Modifies Covenants For Additional Flexibility
BROOMFIELD, Colo., August 23, 2002 - Level 3 Communications, Inc. (Nasdaq:LVLT) today announced that it has amended the terms of its existing Senior Secured Credit Facility.
The Credit Facility was originally signed in September 1999 and increased to $1.775 billion in March 2001. The Credit Facility previously consisted of $1.125 billion in term loans and a $650 million undrawn revolving credit facility. The Credit Facility contained certain financial covenants, including two revenue-based covenants.
Modifications to the Credit Facility, per the terms of the amendment, include the following:
In return for these modifications, the company has agreed to the following:
"Our bank agreement previously contained certain restrictions that might have inhibited our ability to capitalize fully on consolidation opportunities," said Sureel Choksi, CFO of Level 3. "While this amendment was not necessary, it provides Level 3 with additional operating and financial flexibility, while preserving our cash position and fully funded business plan. We are particularly pleased that we were able to achieve this outcome and that we have the support of our bank group in pursuing industry consolidation opportunities."
Financial Covenants
The Minimum Telecom Revenue covenant and the Total Debt to Telecom Revenue covenant from the original credit facility were removed. Additionally, the remaining covenants are now calculated on a consolidated basis, excluding the company's toll road operations. Certain modifications were also made to the Total Leverage Ratio covenant (Total Debt to Adjusted EBITDA) in accordance with the company's current business plan. The covenant will now be tested on a twelve month trailing basis beginning on June 30, 2004, with a maximum allowable level of 11.5x, versus the original credit facility, which had a maximum allowable level of 6.0x beginning on December 31, 2004. Certain other covenants have also been modified.
Liquidity
As part of the amendment, the company agreed to reduce the amount of its undrawn revolving facility from $650 million to $150 million. Of the $150 million, $50 million is available immediately for letters of credit and the remaining $100 million becomes available at the end of one year, subject to the company satisfying certain financial criteria. As previously stated, the company is and remains fully funded through free cash flow breakeven, excluding the $650 million revolving facility.
The company has agreed to maintain minimum consolidated cash balances generally equal to $525 million throughout the life of the Credit Facility. The company had $1.55 billion in cash at the end of the second quarter; pro forma for the $500 million in junior convertible subordinated notes it sold in July 2002. No pay down of outstanding loan amounts was required under the amendment.
Other
Other changes made to the Credit Facility include, but are not limited to, increasing the amount of collateral pledged to the senior secured lenders, certain limitations on the company's ability to repurchase debt for cash and the ability to incur certain types of other indebtedness and liens.
The amended and restated credit facility will be filed with the SEC on a Current Report on Form 8-K.
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.
