Fitch Ratings Affirms Level 3's Ratings.CHICAGO -- Fitch has affirmed the 'CCC' issuer default rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ), along with each individual issue rating assigned to Level 3 Communications
Level 3 Communications NASDAQ: LVLT is a communications and information services company headquartered in Broomfield, Colorado, USA. , Inc. (Level 3) and Level 3 Financing, Inc., as outlined below. Approximately $6 billion of debt as of Sept. 30, 2005 is affected by this action. The affirmation reflects the company's high leverage, large amount of negative free cash flow, and large debt maturities beginning in 2008 as well as the execution risk associated with changing its revenue mix from declining mature services to more growth oriented o·ri·ent n. 1. Orient The countries of Asia, especially of eastern Asia. 2. a. The luster characteristic of a pearl of high quality. b. A pearl having exceptional luster. 3. services. This action also acknowledges Level 3's liquidity position with approximately $1.3 billion of cash and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has as of the end of third-quarter 2005, along with significant covenant flexibility to issue more holding company debt. The predominant credit profile risk facing Level 3 relates to its need to address significant debt maturities starting in 2008 when $1.3 billion of debt matures. While the company was successful placing $880 million of convertible senior notes in April 2005, there is no guarantee that additional market access will be available absent material operational and financing improvements. Fitch expects that negative free cash flow should improve significantly for the company in 2006 due to its pending acquisition of WilTel Communications WilTel Communications (formerly known as Williams Communications, which was formerly part of The Williams Companies, Inc) is a telco and Tier 2 Internet Service Provider with its own MPLS-enabled OC-192 optical wave division multiplexing backbone network. Group, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control (WilTel), scaling of growth services, and lower capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. compared with 2005. Nevertheless, Fitch expects that the company will continue to produce negative free cash flow through 2007. Level 3's maturity schedule for the next five years consists of $0 in 2006, $1 million in 2007, $1.291 billion in 2008, $363 million in 2009, and $1.6 billion in 2010. The company has projected that negative free cash flow for full-year 2005 will range between $370 million-395 million. Level 3 has $1.3 billion of cash and marketable securities. Its capital structure consists of a fully drawn $730 million secured term loan due 2011 and $500 million of senior unsecured notes at Level 3 Financing, as well as $3.84 billion of senior unsecured and $875 million of subordinated notes at the Level 3 holding company level. One covenant currently limiting new debt issuance that gives the company good flexibility is total consolidated debt divided by consolidated capital, which should be less than 2.25 times (x). Fitch estimates that this covenant would allow Level 3 to issue more than $6 billion of new incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. debt. Level 3 does not have any maintenance covenants related to interest coverage or leverage. If Level 3 is unable to materially improve free cash flow in 2006, significantly reduce leverage, or be unable to show continued good progress in changing its revenue mix to a greater growth focus, a negative rating action might result, which could include a change of Rating Outlook by Fitch. Fitch has affirmed the following ratings: Level 3 Communications, Inc. -- Issuer default rating 'CCC'; -- Senior unsecured 'CCC-'/'R5'; -- Subordinated 'CC'/'R6'; -- Rating Outlook Stable. Level 3 Financing, Inc. -- Issuer default rating 'CCC'; -- Senior secured term loan 'B'/'R1'; -- Senior unsecured 'B'/'R1'; -- Rating Outlook Stable. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflict of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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