Long-Term Debt and Credit Facilities

3 Months Ended

Mar. 31, 2024

Debt Disclosure [Abstract]

Long-Term Debt and Credit Facilities

Long-Term Debt and Credit Facilities

On March 22, 2024 (the "Effective Date"), Lumen Technologies, Inc ("Lumen"), Level 3 Financing, Inc. ("Level 3"), Qwest Corporation ("Qwest") and a group of creditors holding a majority of our consolidated debt (the "Consenting Debtholders" and, collectively with Lumen, Level 3 and Qwest, the "TSA Parties") completed transactions contemplated under the amended and restated transaction support agreement ("TSA") that the TSA Parties entered into on January 22, 2024 (the "TSA Transactions"), including, among others, the following transactions:

•Lumen and certain of the Consenting Debtholders entered into two new superpriority credit agreements that established new revolving credit and term loan facilities (the “New Parent Facilities”), in return for the termination, repayment or exchange of substantially all of the commitments and debt due under Lumen’s amended and restated credit agreement dated January 31, 2020 (the “Former Parent Facilities”);

•Lumen and certain of the Consenting Debtholders agreed to exchange a substantial portion of Lumen’s senior secured notes (the "Former Parent Secured Notes") for newly-issued Lumen superpriority secured notes and cash;

•Level 3 and certain of the Consenting Debtholders entered into a new credit agreement that established new term loan facilities (the “New Level 3 Facilities”) in exchange for substantially all of the term loan debt due under Level 3’s amended and restated credit agreement, dated as of November 29, 2019 (the “Former Level 3 Facility”);

•Level 3 and certain of the Consenting Debtholders agreed to exchange a substantial portion of (i) certain Level 3 senior secured notes (the "Former Level 3 Secured Notes") for newly-issued Level 3 first lien notes and (ii) each series of Level 3 senior unsecured notes for newly-issued Level 3 second lien notes; and

•Level 3 privately placed $1.575 billion in aggregate principal amount of newly-issued first lien notes maturing 2029, $1.325 billion of which was cash proceeds, $200 million of which was issued in exchange for Lumen 4.00% senior secured notes and $50 million of which was comprised of non-cash lender fees.

The following table reflects the consolidated long-term debt of Lumen Technologies, Inc. and its subsidiaries as of the dates indicated below, including unamortized discounts and premiums and unamortized debt issuance costs:

	Interest Rates(1)	Maturities(1)	March 31, 2024		December 31, 2023
			(Dollars in millions)
Secured Senior Debt: (2)
Lumen Technologies, Inc.
New Parent Facilities:
Series A Revolving Credit Facility(3)	SOFR + 4.00%	2028	$	—	—
Series B Revolving Credit Facility(4)	SOFR + 6.00%	2028	—		—
Term Loan A(5)	SOFR + 6.00%	2028	372		—
Term Loan B-1(6)	SOFR + 2.35%	2029	1,625		—
Term Loan B-2(6)	SOFR + 2.35%	2030	1,625		—
Former Parent Facilities:
Term Loan B(7)	SOFR + 2.25%	2027	57		3,891
Other Facilities(8)	SOFR + 2.00%	2025	—		1,399
Superpriority Notes	4.125%	2029 - 2030	812		—
Former Parent Secured Notes	4.000%	2027	—		1,250
Subsidiaries
Level 3 Financing, Inc.
New Level 3 Facilities:
Term Loan B-1(9)	SOFR + 6.56%	2029	1,199		—
Term Loan B-2(9)	SOFR + 6.56%	2030	1,199		—
Former Level 3 Facility(10)	SOFR + 1.75%	2027	12		2,411
First Lien Notes(11)	10.500% to 11.000%	2029 - 2030	3,846		925
Second Lien Notes	3.875% to 4.875%	2029 - 2031	2,229		—
Former Level 3 Senior Notes	3.400% to 3.875%	2027 - 2029	—		1,500
Unsecured Senior Notes and Other Debt:
Lumen Technologies, Inc.
Senior notes(12)	4.000% - 7.650%	2025 - 2042	2,113		2,143
Subsidiaries:
Level 3 Financing, Inc.
Senior notes(13)	3.400% - 4.625%	2027 - 2029	1,865		3,940
Qwest Corporation
Senior notes	6.500% - 7.750%	2025 - 2057	1,986		1,986
Term loan(14)	SOFR + 2.50%	2027	—		215
Qwest Capital Funding, Inc.
Senior notes	6.875% - 7.750%	2028 - 2031	192		192
Finance lease and other obligations	Various	Various	279		285
Unamortized discounts, net			(492)		(4)
Unamortized debt issuance costs			(242)		(145)
Total long-term debt			18,677		19,988
Less current maturities			(86)		(157)
Long-term debt, excluding current maturities			$	18,591	19,831

______________________________________________________________________ 

(1)As of March 31, 2024. All references to "SOFR" refer to the Secured Overnight Financing Rate.

(2)As discussed further below in this Note, the debt listed under the caption “Senior Secured Debt” is either guaranteed by affiliates of the issuer, secured, or both. As discussed further in footnotes 12 and 13, we reclassified in the table above certain notes that were guaranteed, secured, or both prior to the Effective Date from “secured” to “unsecured” in light of amendments that released such prior guarantees and security interests.

(3)Series A Revolving Credit Facility had an interest rate of 8.050%, as of March 31, 2024.

(4)Series B Revolving Credit Facility had an interest rate of 10.050% as of March 31, 2024.

(5)Term Loan A had an interest rate of 11.329% as of March 31, 2024.

(6)Term Loan B-1 and B-2 each had an interest rate of 7.739% as of March 31, 2024.

(7)Term Loan B had an interest rate of 7.695% and 7.720% as of March 31, 2024 and December 31, 2023, respectively.

(8)Reflects revolving credit facility and term loan A and A-1 debt issued under the Former Parent Facilities, which had interest rates of 7.464% and 7.470%, respectively, as of December 31, 2023.

(9)The Level 3 Term Loan B-1 and B-2 each had an interest rate of 11.889% as of March 31, 2024.

(10)Reflects Level 3 Tranche B 2027 Term Loan issued under the Former Level 3 Facility, which had an interest rate of 7.195% and 7.220% as of March 31, 2024 and December 31, 2023, respectively.

(11)Includes Level 3's 10.500% Senior Secured Notes due 2030 issued in early 2023, the terms of which have been amended to be consistent with Level 3's first lien notes issued on March 22, 2024.

(12)The total of these notes at March 31, 2024 includes the remaining aggregate principal amount due under the Former Parent Secured Notes, the terms of which were amended on March 22, 2024 to release the guarantees of such debt and certain security interests relating thereto.

(13)The total for these notes at March 31, 2024 includes the remaining aggregate principal amount due under the Former Level 3 Secured Notes, the terms of which were amended on March 22, 2024 to release the guarantees of such debt and certain security interests relating thereto.

(14)The Qwest Corporation Term Loan had an interest rate of 7.970% as of December 31, 2023.

Long-Term Debt Maturities

Set forth below is the aggregate principal amount of our long-term debt as of March 31, 2024 (excluding unamortized discounts, net, and unamortized debt issuance costs), maturing during the following years.

	(Dollars in millions)
2024 (remaining nine months)	$	64
2025	542
2026	238
2027	847
2028	1,162
2029 and thereafter	16,558
Total long-term debt	$	19,411

Impact of Debt Transactions

Consummation of the above-described TSA Transactions substantially changed the structure and terms of our consolidated long-term debt. The principal changes included:

•reducing the aggregate principal amount of our total debt maturities due on or before December 31, 2027 by approximately $10.2 billion (excluding finance leases and other obligations);

•increasing the average weighted interest rate payable under our consolidated long-term debt from 6.23% to 7.73%;

•increasing the portion of our consolidated long-term debt that is guaranteed, secured or both;

•modifying the covenants applicable to our consolidated long-term debt;

•raising $1.325 billion of new capital through the issuance of Level 3 first lien notes maturing 2029;

•obtaining approximately $1.0 billion of new Lumen revolving credit facilities maturing 2028 to replace Lumen's former $2.2 billion revolving credit facility. Under these new revolving credit facilities, Lumen had no borrowings as of March 31, 2024 and had approximately $241 million of letters of credit issued and undrawn, leaving approximately $715 million capacity as of such date; and

•repaying certain indebtedness of Lumen and Qwest.

Repayments and Issuances

The following table sets forth the aggregate principal amount of each of Lumen's consolidated debt arrangements that were partially or fully paid in exchange for cash or newly-issued debt during the first quarter of 2024 in connection with the TSA Transaction:

	Aggregate Principal Amount (in millions)
Debt	Repayment		Exchange
Lumen Technologies, Inc.
Term Loan A	$	933	—
Term Loan A-1	266		—
Term Loan B	575		3,259
5.125% Senior Notes due 2026	116		147
4.000% Senior Notes due 2027	153		865
Level 3 Financing, Inc.
Term Loan B	—		2,398
3.400% Senior Notes due 2027	—		668
3.875% Senior Notes due 2029	—		678
4.625% Senior Notes due 2027	—		606
4.250% Senior Notes due 2028	—		712
3.625% Senior Notes due 2029	—		458
3.750% Senior Notes due 2029	—		453
Qwest Corporation
Senior Term B Loan	215		—
Total	$	2,258	10,244

The following table sets forth the aggregate principal amount of debt issued by Lumen or Level 3 during the first quarter of 2024 in connection with the TSA Transactions:

New Debt Issuances(1)		Aggregate Principal Amount as of March 31, 2024 (in millions)
Lumen Technologies, Inc.
Term Loan A(2)		$	372
Term Loan B-1(2)	Exchange	1,625
Term Loan B-2(2)	Exchange	1,625
4.125% Superpriority Notes due 2029-2030	Exchange	812
Level 3 Financing, Inc.
Term Loan B-1	Exchange	1,199
Term Loan B-2	Exchange	1,199
10.500% First Lien Notes due 2029	Exchange	668
10.750% First Lien Notes due 2029	Exchange	678
11.000% First Lien Notes due 2029		1,375
11.000% First Lien Notes due 2029	Exchange	200
4.875% Second Lien Notes due 2029	Exchange	606
4.500% Second Lien Notes due 2030	Exchange	712
3.875% Second Lien Notes due 2030	Exchange	458
4.000% Second Lien Notes due 2031	Exchange	453
Total		$	11,982

______________________________________________________________________ 

(1)Except for the Term Loan A and as otherwise noted herein with respect to Level 3's 11.000% first Lien Notes due 2029, all of the new debt listed in this table was issued in exchange for previously-issued debt of Lumen or Level 3.

(2)Reflected approximately $13 million of term loan installment payments made between March 22, 2024 and March 31, 2024.

In evaluating the terms of the TSA transaction, we determined for certain of our creditors that the new debt instruments were substantially different than pre-existing debt and therefore constituted an extinguishment of old debt and establishment of new debt for which we recorded a gain on extinguishment in the first quarter of 2024. This new debt was recorded at fair value generating a reduction to debt of $492 million which was included in our aggregate net gain on extinguishment of $275 million, recognized in other income (expense), net in our consolidated statement of operations for the three months ended March 31, 2024. The remaining creditors’ debt was not substantially different under the terms of the TSA transaction and was treated under modification accounting rules. In conjunction with the TSA transaction, we paid $209 million in lender fees and $174 million in additional third-party costs. Of these amounts, $157 million lender fees were an offset to the gain on extinguishment and $112 million in third-party costs were recorded to selling, general and administrative expense in our consolidated statement of operations for the three months ended March 31, 2024. In accordance with US GAAP provisions for modification and extinguishment accounting, $52 million in lender fees and $62 million in third-party costs, respectively, were capitalized and will be amortized over the new terms of the arrangements.

For information on various issuances, exchanges or payments of long-term indebtedness by Lumen or its subsidiaries during 2023, see Note 7—Long-Term Debt and Credit Facilities in Item 8 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2023.

Debt of Lumen Technologies, Inc. and its Subsidiaries

At March 31, 2024, most of our outstanding consolidated debt had been incurred by Lumen or one of the following three other subsidiaries each of which has borrowed funds either on a standalone basis or as part of a separate restricted group with certain of its subsidiaries:

•Level 3 Financing, Inc. ("Level 3"), including its parent guarantor Level 3 Parent, LLC ("Level 3 Parent") and certain subsidiary guarantors;

•Qwest Corporation; and

•Qwest Capital Funding, Inc., including its parent guarantor, Qwest Communications International Inc.

Each of these borrowers or borrowing groups has entered into one or more credit agreements with certain financial institutions or other institutional lenders, or issued senior notes. Certain of these debt instruments are described further below or in Note 7 to the financial statements included in Item 8 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2023.

Lumen Credit Agreements

Superpriority Revolving/Term A Credit Agreement

On the Effective Date, Lumen, as borrower, the lenders party thereto and Bank of America, as administrative agent and collateral agent, entered into the Superpriority Revolving/Term A Credit Agreement (the “RCF/TLA Credit Agreement”) providing for:

•a superpriority “first out” series A revolving credit facility with commitments of approximately $489 million (the “SP RCF-A”);

•a superpriority “second out” series B revolving credit facility with commitments of approximately $467 million (the “SP RCF-B”, and together with the SP RCF-A, the “SP RCF”); and

•a superpriority secured term loan facility in the amount of approximately $377 million (the “SP TLA”).

Interest on borrowings under the RCF/TLA Credit Agreement is payable at the end of each interest period at a rate equal to, at Lumen’s option

•for the SP RCF-A, term SOFR (subject to a 2.00% floor) plus 4.00% for term SOFR loans or a base rate plus 3.00% for base rate loans;

•for the SP RCF-B, term SOFR (subject to a 2.00% floor) plus 6.00% for term SOFR loans or a base rate plus 5.00% for base rate loans; and

•for the SP TLA, term SOFR (subject to a 2.00% floor) plus a 6.00% for term SOFR loans or a base rate plus 5.00% for base rate loans.

Lumen may prepay amounts outstanding under the SP RCF-B or SP TLA at anytime without premium or penalty. If no amounts are outstanding under the SP RCF-B, Lumen may prepay amounts outstanding under the SP RCF-A without premium or penalty.

The SP RCF-A and SP RCF-B mature on June 1, 2028 (in each case subject to a springing maturity in certain circumstances). The SP TLA matures on June 1, 2028 and requires Lumen to make quarterly amortization payments of 1.25% of the initial principal amount and certain specified mandatory prepayments upon the occurrence of certain transactions.

The RCF/TLA Credit Agreement contains certain customary events of default (subject, in certain cases, to customary grace and cure periods). If an event of default occurs, the lenders may, among other actions, accelerate the outstanding loans.

In connection with entry into the RCF/TLA Credit Agreement, the (i) revolving commitments outstanding under the Former Parent Facilities were permanently reduced to zero and terminated, (ii) all term A/A-1 loans outstanding under the Former Parent Facilities were prepaid in full and (iii) the outstanding balance of the term B loans under the Former Parent Facilities was reduced to approximately $57 million.

Superpriority Term B Credit Agreement

On the Effective Date, Lumen, as borrower, the lenders party thereto, Wilmington Trust, National Association (“WTNA”), as administrative agent, and Bank of America, as collateral agent, entered into a Superpriority Term B Credit Agreement (the “TLB Credit Agreement” and, together with the RCF/TLA Credit Agreement, the “SP Credit Agreements”), providing for:

•a superpriority secured term loan facility in a principal amount of approximately $1.6 billion maturing April 15, 2029 (the “SP TLB-1”); and

•a superpriority secured term loan facility in a principal amount of approximately $1.6 billion maturing April 15, 2030 (the “SP TLB-2”, and together with the SP TLB-1, the “SP TLB”).

Interest on borrowings under the TLB Credit Agreement is payable at the end of each interest period at a rate equal to, at Lumen’s option, adjusted term SOFR (subject to a 0% floor) plus 2.35% for term SOFR loans or a base rate plus 1.35% for base rate loans.

The SP TLB requires Lumen to make quarterly amortization payments of 0.25% of the initial principal amount and certain specified mandatory prepayments upon the occurrence of certain transactions. Amounts outstanding under the SP TLB may be prepaid at any time without premium or penalty.

The TLB Credit Agreement contains certain customary events of default (subject in certain cases to customary grace and cure periods). If an event of default occurs, the lenders may, among other actions, accelerate the outstanding loans.

Level 3 Credit Agreement

On the Effective Date, Level 3, as borrower, Level 3 Parent, the lenders party thereto and WTNA, as administrative agent and collateral agent, entered into a credit agreement (the “New Level 3 Credit Agreement”), providing for:

•a secured term B-1 loan facility in the principal amount of approximately $1.2 billion maturing April 15, 2029 (the “TLB-1”); and

•a secured term B-2 loan facility in the principal amount of approximately $1.2 billion maturing April 15, 2030 (the “TLB-2” and, together with the TLB-1, the “New Level 3 Facilities”).

Interest on borrowings under the New Level 3 Credit Agreement is payable at the end of each interest period at a rate equal to, at Level 3’s option, term SOFR (subject to a 2.00% floor) plus 6.56% for term SOFR loans or a base rate plus 5.56% for base rate loans.

Amounts outstanding under the New Level 3 Credit Agreement may be prepaid at any time, subject to a premium of (i) 2.00% of the aggregate principal amount if prepaid on or prior to the 12-month anniversary of the Effective Date and (ii) 1.00% of the aggregate principal amount if prepaid after the 12-month anniversary of the Effective Date and on or prior to the 24-month anniversary of the Effective Date. The New Level 3 Facilities require Level 3 to make certain specified mandatory prepayments upon the occurrence of certain transactions.

The New Level 3 Credit Agreement contains certain customary events of default (subject, in certain cases, to customary grace and cure periods). If an event of default occurs, the lenders may, among other actions, accelerate the outstanding loans.

In connection with entry into the New Level 3 Credit Agreement, the outstanding balance of the term B loans under the Former Level 3 Facility was reduced to approximately $12 million.

Senior Notes

The Company’s consolidated indebtedness at March 31, 2024 included:

•superpriority senior secured notes issued by Lumen;

•first and second lien secured notes issued by Level 3; and

•senior unsecured notes issued by Lumen, Level 3, Qwest Corporation, and Qwest Capital Funding, Inc.

All of these notes carry fixed interest rates and all principal is due on the notes’ respective maturity dates, which rates and maturity dates are summarized in the table above.

Except for a limited number of senior notes issued by Qwest Corporation, the issuer generally can redeem the notes, at its option, in whole or in part, (i) pursuant to a fixed schedule of pre-established redemption prices, (ii) pursuant to a “make whole” redemption price or (iii) under certain other specified limited conditions.

Certain Guarantees and Security Interests

Lumen’s obligations under the RCF/TLA Credit Agreement are unsecured, but certain of Lumen’s subsidiaries have provided or, in certain cases after receiving necessary regulatory approvals, will provide an unconditional guarantee of payment of Lumen’s obligations (such entities, the “Lumen Guarantors”) and certain of such guarantees will be secured by a lien on substantially all of the assets of the applicable Lumen Guarantors. Level 3 Parent, Level 3 and certain of Level 3’s subsidiaries have provided or, in certain cases after receiving necessary regulatory approvals, will provide an unconditional guarantee of payment of Lumen’s obligations under the SP RCF- A of up to $150 million and under the SP RCF-B of up to $150 million, in each case secured by a lien on substantially all of their assets (such entities, the “Level 3 Collateral Guarantors”). The guarantee by the Level 3 Collateral Guarantors may be reduced or terminated under certain circumstances. Qwest and certain of its subsidiaries have provided an unsecured guarantee of collection of Lumen’s obligations under the SP RCF and SP TLA (the “Qwest Guarantors”).

Lumen’s obligations under the TLB Credit Agreement are unsecured. The SP TLB is guaranteed by the Lumen Guarantors and the Qwest Guarantors on the same basis as those entities guarantee Lumen’s obligations under the RCF/TLA Credit Agreement.

Level 3’s obligations under the New Level 3 Credit Agreement are secured by a first lien on substantially all of its assets (subject, in certain cases, to receipt of necessary regulatory approvals). In addition, the other Level 3 Collateral Guarantors have or, in certain cases after receiving necessary regulatory approvals, will provide an unconditional guarantee of payment of Level 3’s obligations under the New Level 3 Credit Agreement secured by a lien on substantially all of their assets.

Lumen’s superpriority secured senior notes are guaranteed by the Lumen Guarantors and the Qwest Guarantors on the same basis as those entities guarantee Lumen’s obligations under the RCF/TLA Credit Agreement. Level 3’s obligations under its first lien notes are secured by a first lien on substantially all of its assets (subject, in certain cases, to receipt of necessary regulatory approvals), and are guaranteed by the other Level 3 Collateral Guarantors (or, for certain such guarantors, will be guaranteed upon the receipt of required regulatory approvals) on the same basis as the guarantees provided by such entities under the New Level 3 Facilities. Level 3’s obligations under its second lien notes are secured by a second lien on substantially all of its assets (subject, in certain cases, to receipt of necessary regulatory approvals), and are guaranteed by the other Level 3 Collateral Guarantors (or, for certain such guarantors, will be guaranteed upon the receipt of required regulatory approvals) on the same basis as the guarantees provided by such entities under the New Level 3 Facilities, except the lien securing such guarantees is a second lien. The senior notes issued by Qwest Capital Funding, Inc. are guaranteed by its parent, Qwest Communications International Inc.

Covenants

Lumen

Under the RCF/TLA Credit Agreement and commencing with the fiscal quarter ended June 30, 2024, Lumen may not permit:

(i) its maximum total net leverage ratio to exceed 5.75 to 1.00 as of the last day of each fiscal quarter, stepping down to 5.50 to 1.00 with respect to each fiscal quarter ending after December 31, 2024 and stepping down to 5.25 to 1.00 with respect to each fiscal quarter ending after December 31, 2025; or

(ii) its interest coverage ratio as of the last day of any test period to be less than 2.00 to 1.00.

Lumen’s SP Credit Agreements and superpriority senior secured notes contain various representations and warranties and extensive affirmative and negative covenants. Such covenants include, among other things and subject to certain significant exceptions, restrictions on our ability to declare or pay dividends, repurchase stock, repay certain other indebtedness, create liens, incur additional indebtedness, make investments, engage in transactions with our affiliates, dispose of assets and merge or consolidate with any other person.

Lumen’s senior unsecured notes were issued under four separate indentures. These indentures restrict Lumen’s ability to (i) incur, issue or create liens upon its property and (ii) consolidate with or merge into, or transfer or lease all or substantially all of its assets to any other party.

Under certain circumstances in connection with a “change of control” of Lumen, it will be required to make an offer to repurchase each series of these senior notes (other than two of its older series of notes) at a price of 101% of the principal amount redeemed, plus accrued and unpaid interest.

Level 3

The New Level 3 Credit Agreement and Level 3’s first and second lien secured notes contain various representations and extensive affirmative and negative covenants. Such covenants include, among other things and subject to certain significant exceptions, restrictions on their ability to declare or pay dividends, repay certain other indebtedness, create liens, incur additional indebtedness, make investments, dispose of assets and merge or consolidate with any other person. Also, under certain circumstances in connection with a “change of control” of Level 3 Parent or Level 3, Level 3 will be required to make an offer to repurchase each series of its outstanding senior notes at a price of 101% of the principal amount redeemed, plus accrued and unpaid interest.

Qwest Companies

The senior notes of Qwest Corporation were issued under indentures dated April 15, 1990 and October 15, 1999. These indentures contain restrictions on the incurrence of liens and the consummation of certain transactions substantially similar to the above-described covenants in the indentures governing Lumen’s senior unsecured notes (but contain no mandatory repurchase provisions). The senior notes of Qwest Capital Funding, Inc. were issued under an indenture dated June 29, 1998 containing terms substantially similar to those set forth in Qwest Corporation's indentures.

Compliance

As of March 31, 2024, Lumen Technologies, Inc. believes it and its subsidiaries were in compliance with the provisions and financial covenants in their respective material debt agreements in all material respects.

Guarantees

Lumen does not guarantee the debt of any unaffiliated parties, but, as noted above, as of March 31, 2024, certain of its key subsidiaries guaranteed (i) its debt outstanding under its SP Credit Agreements, its superpriority senior secured notes and its $225 million letter of credit facility and (ii) the outstanding term loans or senior secured notes issued by certain other subsidiaries. As further noted above, several of the subsidiaries guaranteeing these obligations have pledged substantially all of their assets to secure certain of their respective guarantees.