Level 3 Communications' bank debt climbed about five points last week on news that the company has signed a definitive agreement to acquire all the assets of Genuity. Traders said that the bank debt rose to the 72 range, up from the mid-to-high 60s. This summer, Level 3 received a $500 million injection of new capital from Longleaf Partners Funds, Berkshire Hathaway and Legg Mason. At the time, market players speculated that the company would be in a position to begin consolidation in the telecom sector. Questions for Sureel Choksi, Level 3's cfo, were referred to a spokesperson, who did not return calls by press time.
Genuity filed for bankruptcy at the end of November to facilitate the acquisition process. The company had been in default under its credit agreement since July, when Verizon Communications decided to relinquish its option to acquire a controlling interest in Genuity. The $242 million in proceeds from the sale of assets to Level 3 and the remaining amount on Genuity's balance sheet will go to pay down creditors. The company currently has approximately $1.6 billion of bank debt outstanding, noted a company spokesman. While Genuity's bank debt has not been moving in the secondary loan market, one trader provided a range of 20-30 for the paper.