Level 3 Communications, Inc. (NASDAQ: LVLT) is trading up marginally this morning on word that its subsidiary, Level 3 Financing, Inc., has received additional financing commitments. The additional financing is from lenders to increase the borrowings under its existing $1.4 billion senior secured credit facility. So this is an expansion, and is via the creation of a $220 million Tranche B Term Loan.
Level 3’s financing subsidiary will amend and restate its existing senior secured credit facility to include a new $220 million Tranche B Term Loan. The additional $220 million will also mature along with the original $1.4 billion term loan on March 13, 2014.
It isn’t cheap financing, although nothing else seems cheap on the debt side right now either when you look at many investment grade-grade companies having to pay close to 500 basis-points over benchmark maturities. The interest on this new tranche is equal to LIBOR plus 850 basis-points, but the LIBOR rate has a floor of 3.00%. So the lowest interest rate that this tranche can carry seems to be 11.50%. No changes will be made to any of the restrictive covenants contained in the existing senior secured credit facility.
The company expects to complete the transaction by mid-April. It expects to receive net proceeds of approximately $214 million from the financing and the company said that it plans to use the funds for “general corporate purposes.” Banc of America Securities is listed as the lead arranger and sole book-runner for the tranche.
The good news is that even expensive financing is being deemed as good news for now. Shares are up almost 2% at $1.06 in early trading.
JON C. OGG