Feeds

Buffet and friends sub Level 3 $500m for acquisitions

Chap 11 to predator in 60 seconds...

  • alert
  • submit to reddit

High performance access to file storage

ComputerWire: IT Industry Intelligence

Level 3 Communications Inc sees itself as the company best placed to carry out a wide-ranging consolidation among global carriers after raising $500m in bonds from a group of corporate investors including Berkshire Hathaway, which is chaired by Warren Buffet. This gives the Broomfield, Colorado-based company $1.5bn to build a worldwide communications empire.

While a confidante of Microsoft Corp's chairman Bill Gates, Buffet has maintained his position as one of America's wealthiest citizens by holding a strong distrust of technology stocks. Many derided the "Oracle of Omaha's" views as old-fashioned, but recent stock market trends have upheld his judgement.

What he sees in Level 3 is clearly geared to the company's potential, rather than past performance, but it will not have escaped his notice that it is sitting on $1.1bn in cash and equivalents at a time when many of its peers are in Chapter 11 protection against their creditors and can be picked up for peanuts.

"Liquid resources and strong financial backing are scarce and valuable assets in today's telecommunications world. Level 3 has both," said Buffet.

Level 3's shares leapt 59.5% to $4.61 on the news, showing that Buffet's magic is already doing its work as the company is already in a strong position to use its paper to help finance acquisitions. And the new bondholders are already up on the deal as their 9% notes are convertible into common stock at any time at a price of $3.61.

Level 3 CEO James Crowe said the ongoing shakeout in telecoms is creating "extraordinary opportunities" as companies, their network assets and customer bases become available. "We are fortunate to have both network management expertise and financial dry powder, which will allow us to continue pursuing opportunities that create value for our stockholders," he said.

One of the other major investors, Bill Millar of Legg Mason Funds Management, said that demand for telecoms services continued to grow at a time when the number of service providers was shrinking. "Spending on communications services is non-discretionary," he said.

Level 3 has a far from impressive financial record, and in the first quarter of this year to March 31 recorded a net loss of $90m, down from a loss of $535m on revenue of $386m, down from $448m.

In February, Level 3 was forced to deny that it might be forced to seek Chapter 11 protection as it acknowledged that it might violate a financial covenant with its bondholders later in the year. It said it had begun discussions with JP Morgan Chase, the administrative agent for its senior secured debt facility, to "assess modifications."

Level 3 has bought two software resellers this year: Software Spectrum Inc and Corporate Software Inc in moves that it justified by the trend to buy software functionality and data storage as a commercial service accessed remotely over broadband networks. But there is little doubt that its main motivation was to increase revenue and remain in compliance with covenants with its bankers.

© Computerwire.com. All rights reserved.

High performance access to file storage

More from The Register

next story
Sorry London, Europe's top tech city is Munich
New 'Atlas of ICT Activity' finds innovation isn't happening at Silicon Roundabout
MtGox chief Karpelès refuses to come to US for g-men's grilling
Bitcoin baron says he needs another lawyer for FinCEN chat
Dropbox defends fantastically badly timed Condoleezza Rice appointment
'Nothing is going to change with Dr. Rice's appointment,' file sharer promises
Audio fans, prepare yourself for the Second Coming ... of Blu-ray
High Fidelity Pure Audio – is this what your ears have been waiting for?
Did a date calculation bug just cost hard-up Co-op Bank £110m?
And just when Brit banking org needs £400m to stay afloat
Zucker punched: Google gobbles Facebook-wooed Titan Aerospace
Up, up and away in my beautiful balloon flying broadband-bot
Apple DOMINATES the Valley, rakes in more profit than Google, HP, Intel, Cisco COMBINED
Cook & Co. also pay more taxes than those four worthies PLUS eBay and Oracle
It may be ILLEGAL to run Heartbleed health checks – IT lawyer
Do the right thing, earn up to 10 years in clink
prev story

Whitepapers

Securing web applications made simple and scalable
In this whitepaper learn how automated security testing can provide a simple and scalable way to protect your web applications.
Five 3D headsets to be won!
We were so impressed by the Durovis Dive headset we’ve asked the company to give some away to Reg readers.
HP ArcSight ESM solution helps Finansbank
Based on their experience using HP ArcSight Enterprise Security Manager for IT security operations, Finansbank moved to HP ArcSight ESM for fraud management.
The benefits of software based PBX
Why you should break free from your proprietary PBX and how to leverage your existing server hardware.
Mobile application security study
Download this report to see the alarming realities regarding the sheer number of applications vulnerable to attack, as well as the most common and easily addressable vulnerability errors.