Broomfield-based Level 3 Communications announced Tuesday that it would buy back $550 million in 12.25 percent notes due in 2013, a move one analyst says will allow the company to pursue acquisitions.
Level 3 plans to fund the debt buyback with a $640 million offering of notes maturing in 2018.
UBS telecom analyst John Hodulik said Level 3 is probably repurchasing the debt because of the high interest rate and a restriction attached to the bonds that effectively makes it less attractive for the company to acquire a firm. It is the last of Level 3’s bonds to contain that stringent covenant.
“Its redemption may pave the way for further acquisitions by Level 3,” Hodulik wrote in a research note. “Potential targets could include Global Crossing and XO Communications.”
During a 13-month stretch beginning in late 2005, Level 3 spent more than $3 billion on seven acquisitions. The company struggled to integrate the acquisitions, which may have led to the abrupt resignation of co-founder and chief operating officer Kevin O’Hara in 2008. Andy Vuong, The Denver Post
