Bank debt of Level 3 Communications jumped some 10 points to the 68-70 level after the announcement that the company would raise $500 million in new capital from Longleaf Partners, Berkshire Hathaway and Legg Mason. Last week, investors could have bought the paper in the high 50s, one dealer said, noting that more than $20 million had changed hands after the announcement earlier this week. Investors perceived the move as a sign of positive support for the beleaguered telecom industry.
The company will sell $500 million in 10-year junior convertible subordinated notes bearing a 9% coupon to the three investors. Longleaf Partners is purchasing $300 million of the convertible notes, and Berkshire Hathaway and Legg Mason will each pick up $100 million of the new paper. According to a company statement, Level 3 could potentially use the funds for acquisitions relating to industry consolidation. Calls to SureelChoksi, cfo of Level 3, Marc Hamburg, cfo of Berkshire Hathaway, and Charles DaleyJr., treasurer at Legg Mason, were referred to spokespeople who did not return calls. A spokeswoman for Longleaf Partners declined to comment, referring calls to Level 3.