SEC Filing Summary: CenturyLink, Inc. and Level 3 Parent, LLC
Business Context and Reporting Period
This Form 8-K Current Report, dated June 15, 2020, is filed by CenturyLink, Inc. and Level 3 Parent, LLC. The filing details the completion of a material definitive agreement involving the issuance of new senior notes by Level 3 Financing, Inc., a wholly-owned subsidiary of Level 3 Parent, LLC and an indirect subsidiary of CenturyLink.
Key Financial Metrics and Transaction Details
- New Debt Issuance: Completed a private placement of $1.2 billion aggregate principal amount of 4.250% Senior Notes due 2028 (the "2028 Notes").
- Net Proceeds: Approximately $1.186 billion after deducting fees and offering expenses.
- Use of Proceeds: Funds will be used for general corporate purposes and to redeem existing debt, specifically:
- $840 million of 5.375% Senior Notes due 2022.
- $360 million of 5.625% Senior Notes due 2023.
- Interest Payments: Payable semi-annually on January 1 and July 1, commencing January 1, 2021.
- Maturity Date: July 1, 2028.
- Guarantees: The 2028 Notes are guaranteed on an unsubordinated and unsecured basis by Level 3 Parent, LLC. Efforts are underway to secure a guarantee from Level 3 Communications, LLC.
Material Changes and Debt Restructuring
The transaction represents a material change in the company's capital structure, specifically a refinancing of higher-cost, shorter-term debt with lower-cost, longer-term debt. The company is replacing $1.2 billion in notes maturing in 2022 and 2023 (carrying interest rates of 5.375% and 5.625%) with new notes maturing in 2028 at a 4.250% interest rate. This action extends the debt maturity profile and reduces the weighted average interest cost on the refinanced portion of the debt.
Redemption Terms and Covenants
- Pre-2023 Redemption: Prior to July 1, 2023, notes may be redeemed at 100% of principal plus a "make-whole" premium and accrued interest.
- Post-2023 Redemption: On or after July 1, 2023, redemption prices decline from 102.125% (2023-2024) to 100.000% (on or after July 1, 2025).
- Equity Redemption: Prior to July 1, 2023, up to 40% of the principal may be redeemed at 104.250% using proceeds from equity sales.
- Change of Control: Upon specified change of control events, the issuer must offer to repurchase the notes at 101% of principal plus accrued interest.
- Events of Default: Include failure to pay interest or principal, failure to perform covenants, and bankruptcy or insolvency events.
Investor Verification Checklist
- Verify the execution of redemption notices for the $840 million 2022 Notes and $360 million 2023 Notes.
- Confirm the status of the guarantee from Level 3 Communications, LLC, which is subject to governmental authorizations.
- Review the full text of the Indenture (Exhibit 4.1) for specific covenants and restrictions on future indebtedness.
- Monitor the press release (Exhibit 99.1) for additional details on the use of proceeds and impact on liquidity.
- Assess the impact of the new debt issuance on the company's leverage ratios and interest coverage.