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Long-Term Debt
 3 Months Ended
Mar. 31, 2024
Debt Disclosure [Abstract]  
Long-Term Debt Long-Term Debt and Credit Facilities
On March 22, 2024 (the "Effective Date"), Lumen Technologies, Inc ("Lumen"), Level 3 Financing, Inc. ("Level 3 Financing"), Qwest Corporation ("Qwest") and a group of creditors holding a majority of Lumen's consolidated debt (the "Consenting Debtholders" and, collectively with Lumen, Level 3 Financing 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"). Disclosures within this note will focus on the transactions impacting Level 3 Financing specifically. For detailed information about all transactions completed under the TSA, please see Note 5—Long-Term Debt and Credit Facilities in Item 1 of Part I of Lumen's Quarterly Report on Form 10-Q for the quarter ended March 31, 2024. The TSA Transactions, as they relate specifically to Level 3 Financing, include:

•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, Level 3 Financing first lien notes and cash;

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

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

•Level 3 Financing 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 a portion of the Former Parent Secured Notes and $50 million of which was comprised of non-cash lender fees; and

•Level 3, Level 3 Financing and certain of their affiliates (the "Level 3 Collateral Guarantors") agreed to guarantee a portion of Lumen's obligations under each of its two new revolving credit facilities established as part of the TSA Transactions, as described further below.
The following table reflects our consolidated long-term debt, including finance leases and other obligations, unamortized discounts and premiums, net and unamortized debt issuance costs, but excluding intercompany debt:
Interest Rates (1)
Maturities (1)
March 31, 2024December 31, 2023
(Dollars in millions)
Level 3 Financing, Inc.
Secured Senior Debt:(2)
New Facilities:
Term Loan B-1(3)
SOFR + 6.560%
2029$1,199 — 
Term Loan B-2(3)
SOFR + 6.560%
20301,199 — 
Former Facility(4)
SOFR + 1.75%
202712 2,411 
First Lien Notes(5)
10.500% to 11.000%
2029 - 2030
3,846 925 
Second Lien Notes
3.875% to 4.875%
2029 - 2031
2,229 — 
Former Senior Notes
3.400% - 3.875%
2027 - 2029
— 1,500 
Unsecured Senior Notes:
Senior notes (6)
3.400% - 4.625%
2027 - 2029
1,865 3,940 
Finance leases and other obligationsVariousVarious252 259 
Unamortized (discounts) premiums, net(258)2 
Unamortized debt issuance costs(157)(54)
Total long-term debt10,187 8,983 
Less current maturities(32)(31)
Long-term debt, excluding current maturities$10,155 8,952 
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(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 footnote 6, we reclassified in the "March 31, 2024" column of the table above certain notes that were secured prior to the Effective Date from “secured” to “unsecured” in light of amendments that released such prior security interests.
(3)The Term Loan B-1 and B-2 each had an interest rate of 11.889% as of March 31, 2024.
(4)Reflects Level 3 Tranche B 2027 Term Loan issued under the Former Facilities, which had an interest rate of 7.195% and 7.220% as of March 31, 2024 and December 31, 2023, respectively.
(5)Includes Level 3 Financing'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 Financing's first lien notes issued on March 22, 2024.
(6)The total debt for these notes at March 31, 2024 includes the remaining aggregate principal amount due under the Former 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.
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) premiums, net, unamortized debt issuance costs, and intercompany debt), maturing during the following years:

(Dollars in millions)
2024 (remaining nine months)$24 
202537 
202635 
2027507 
2028507 
2029 and thereafter9,492 
Total long-term debt$10,602 
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 impacting the Level 3 Financing financial statements specifically included:

•reducing the aggregate principal amount of our total consolidated debt maturities due on or before December 31, 2027 by approximately $3.7 billion (excluding finance leases and other obligations);

•increasing the average weighted interest rate payable under our consolidated long-term debt from 5.55% to 8.42%;

•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; and

•raising $1.325 billion of new cash through the issuance of Level 3 Financing first lien notes maturing 2029.
Exchanges and Issuances

The following table sets forth the aggregate principal amount of (i) former debt of Level 3 exchanged for new Level 3 debt and (ii) new debt issued by Level 3 in exchange for former Level 3 debt (except as otherwise noted), in each case during the three months ended March 31, 2024 in connection with the TSA Transaction:

Former notes or facility exchanged
New notes or facility issued
Aggregate principal amount exchanged/issued (in millions)(1)
Term Loan B
Term Loan B-1, B-2
$2,398 
3.400% Senior Notes due 2027
10.500% First Lien Notes due 2029
668 
3.875% Senior Notes due 2029
10.750% First Lien Notes due 2029
678 
4.625% Senior Notes due 2027
4.875% Second Lien Notes due 2029
606 
4.250% Senior Notes due 2028
4.500% Second Lien Notes due 2030
712 
3.625% Senior Notes due 2029
3.875% Second Lien Notes due 2030
458 
3.750% Senior Notes due 2029
4.000% Second Lien Notes due 2031
453 
n/a
11.000% First Lien Notes due 2029(2)
1,575 
Total$7,548 
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(1)See our long-term debt table above for information on the amount of former debt that remains outstanding as of March 31, 2024.
(2)Issued for cash and the other consideration described above.

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 $261 million which was included in our aggregate net gain on extinguishment of $54 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 $112 million in additional third-party costs. Of these amounts, $157 million lender fees were an offset to the gain on extinguishment and $61 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 $51 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 Level 3 during 2023, see Note 7—Long-Term Debt in Item 8 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2023.

Level 3 Financing Credit Agreement

On the Effective Date, Level 3 Financing, as borrower, Level 3 Financing Parent, the lenders party thereto and Wilmington Trust National Association, as administrative agent and collateral agent, entered into a Credit Agreement (the “New Level 3 Financing 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 Financing Facilities”).
Level 3 Financing’s obligations under the New Level 3 Financing 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 Financing’s obligations under the New Level 3 Financing Credit Agreement secured by a lien on substantially all of their assets.

Interest on borrowings under the New Level 3 Financing Credit Agreement is payable at the end of each interest period at a rate equal to, at Level 3 Financing’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 Financing 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 Financing Facilities require Level 3 Financing to make certain specified mandatory prepayments upon the occurrence of certain transactions.

The New Level 3 Financing 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 Facility was reduced to approximately $12 million.

Level 3 Guarantees of Lumen Credit Agreements

Lumen’s obligations under the Superpriority Revolving/Term A Credit Agreement dated as of March 22, 2024 (the “RCF/TLA Credit Agreement”) are unsecured, but the Level 3 Collateral Guarantors have provided or, in certain cases after receiving necessary regulatory approvals, will provide an unconditional guarantee of payment of up to $150 million of Lumen’s obligations under both of the revolving credit facilities created under the RCF/TLA Credit Agreement. Certain of such guarantees will be secured by a lien on substantially all of the assets of the applicable Level 3 Collateral Guarantors. The guarantee by the Level 3 Collateral Guarantors may be reduced or terminated under certain circumstances.

Senior Notes

General Terms of Senior Notes

The Company’s consolidated indebtedness at March 31, 2024 included (i) first and second lien secured notes issued by Level 3 Financing and (ii) senior unsecured notes issued by Level 3 Financing. 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. Level 3 Financing 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

Level 3 Financing’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 Financing Facilities. Level 3 Financing’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 Financing Facilities, except the lien securing such guarantees is a second lien.

Supplier Finance Program

Pursuant to our purchase of network equipment under a supplier finance program implemented in 2021 with one of our key equipment vendors, we are obligated to make quarterly installment payments over a 5-year period and pay annual interest of 1.25% on unpaid balances. The first unsecured quarterly payment was due April 27, 2022, with remaining quarterly payments due through the end of the term on July 1, 2026. The supplier also agreed to certain milestone performance and other provisions that could result in us earning credits to be applied by us towards future equipment purchases. As of March 31, 2024 and December 31, 2023, we have received approximately $17 million and $15 million of credits and our outstanding obligations under the plan was $52 million and $55 million, respectively. As of March 31, 2024, $18 million was included in current maturities of long-term debt and $34 million was included in the long-term debt.

Covenants

The New Level 3 Financing Credit Agreement and Level 3 Financing’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 Financing, Level 3 Financing 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.

Compliance

As of March 31, 2024, we believe we were in compliance with the provisions and financial covenants contained in our debt agreements in all material respects.