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S&P cuts Level 3 notes to CC, rates loan CCC, converts CC
Standard & Poor's said it assigned its CCC bank loan rating to Level 3 Financing Inc.'s $730 million senior secured bank loan package. In addition, a CC rating was assigned to parent Level 3 Communications Inc.'s $320 million 5.25% convertible senior notes due 2011.
Proceeds of the loan and convertible notes will be used to finance a $1.105 billion cash tender offer for a portion of four Level 3 debt issues maturing in 2008 at less than full maturity of principal.
At the same time, the rating on Level 3 Financing's existing 10¾% senior notes due 2011 was lowered to CC from CCC- because the new bank facility reduces the potential recovery of these notes in the event of a bankruptcy.
S&P said the ratings on Level 3 reflect very high credit risk from elevated debt and negative discretionary cash flow, exacerbated by soft telecommunications industry conditions, especially in the long-haul transport sector.
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