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Level 3 cuts its frightening 2014 debt pile in half

  • TC2 Blog
  • 4/12/2012
  • David Rohde

If your company has a centralized procurement process that includes a financial check of all prospective vendors, then you know the routine. You get an offer for a hot telecom service with smoking rates, and you order a financial readout of the vendor that proposed it. The word comes back: Uh-uh.

No enterprise carrier has been nixed more often in this way than Level 3. For the last several years, Level 3 not only has been saddled with $6 billion in debt, but it’s been facing $2.9 billion of these maturities in 2014 alone. That one-year “nut” made Dun & Bradstreet and all other financial and credit rating systems choke on their printouts.

The 2014 date looked pretty far out when I started presenting Level 3’s debt maturity schedule in client and conference sessions in 2009. But by last year that number was looking too close for comfort. When you consider that Level 3 has typically posted about $4 billion in annual revenues – not profits, not “EBITDA” or some other Wall Street concoction, but simply dollars in before any expenses – then the prospect of paying off almost $3 billion in one year was essentially impossible.

But by midyear last year, Level 3 had cut into the 2014 pile and reduced the payoff to $2.5 billion. Then, in its most recent earnings report, Level 3 reported the 2014 maturities were way down to $1.4 billion.

Where did Level 3 get the money to pay it off?

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