Level3 Stock in Trouble

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Level3 Stock in Trouble

Rocky Mountain News reports that Level3 "remains unprofitable, mired in more than $6 billion in debt, and shares have fallen to less than 70 cents. Ordinarily, Level 3 stock would be delisted, but Nasdaq has suspended the $1 minimum requirement until April 9 because of the country's economic turmoil."  With revenues flat, L3 is looking to give itself time to repay all of its debt to forego bankruptcy.

Fox and MarketWatch reported that "Level 3 Communications Inc. had its corporate credit rating cut to SD, or selective default, from CC by Standard & Poor's. S&P also lowered ratings on Level 3's convertible subordinated notes due 2010 to D from C."  In addition, Level3 changed its stock buy back plan -- and is having trouble getting takers. According to Denver Business Journal, "Level 3 is trying to push out repayment of about $1.14 billion of investor-held debt coming due in the next two years -- $305 million in 2009, $836 million in 2010 ­-- to preserve its liquidity in the face of flattening revenue. .... The company had committed to spend as much as $438 million of its cash to buy back some of the 2009 and 2010 notes. It planned to fund the rest of the debt buyback by selling debt notes that mature in 2013 and yield 15 percent interest annually."


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I sat on a call with Level 3's Controller a few weeks back and she explained how L3 has completely restructured its debt in Dec since the speculative bankfuptcy reports were flying in the press. They fully expect to be cash flow positive in 2009 and have a new larger revolving credit line and have lowered their interest rate on debt while restructuring so that no huge payments are on the horizon.

Accounting for the sharp reduction contribution from AOL's business (formerly their largest customer), they have steadily grown sales. They also report that the types of customers they have today are totally different that the ones that defaulted in the dot.com meltdown of yore. The current customer base is very stable.

Based on the layman's notes above and other informatoin I gleaned from the financial call with Level 3 it is my opinion that they will not file for bankruptcy in 2009 or later. Regards, Emmet Tydings, AB&T Telecom

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