CenturyLink enters $9.95 billion term loan, revolving facilities

By Marisa Wong

Morgantown, W.Va., June 20 – CenturyLink, Inc. entered into a credit agreement on Monday for $9,945,000,000 of senior secured credit facilities, according to an 8-K filing with the Securities and Exchange Commission.

The facilities include a $2 billion revolving credit facility and $7,945,000,000 of term loan facilities. The new term loan facilities consist of a $1,575,000,000 term loan A, a $370 million term loan A-1 and a previously announced $6 billion term loan B.

The term loan B was upsized from $4.5 billion, as previously reported.

Bank of America Merrill Lynch, Morgan Stanley Senior Funding Inc., Barclays, Goldman Sachs Bank USA, JPMorgan Chase Bank, NA, MUFG, RBC Capital Markets LLC, Wells Fargo Securities LLC, Mizuho Bank and SunTrust Robinson Humphrey Inc. are the leads on the deal. CoBank, ACB is the lead arranger and bookrunner for the term A-1 loans. Bank of America, NA is administrative agent.

The company intends to use loan proceeds, together with other available funds, to finance the cash portion of the consideration payable in connection with its pending acquisition of Level 3 Communications, Inc., as well as to refinance existing debt and for other general corporate purposes.

The revolver, term loan A and term loan A-1 will mature five years after the closing of the acquisition. The term loan B facility will mature on Jan. 31, 2025.

Borrowings under the term loan B, with an original issue discount of 99.5, have been deposited in an escrow account and will be held prior to the closing of the acquisition. Once all conditions to the acquisition and the credit agreement have been met, the company will be able to borrow under the term loan A and A-1 facilities and revolver.

The term loans A and A-1 and revolver will bear interest at Libor plus an applicable margin between 225 basis points and 300 bps, depending on the company’s total leverage ratio.

Before the acquisition closes, borrowings under the term loan B will bear interest at 1.375% through July 18 and at 2.75% after that. Upon completion of the acquisition, the term loan B will bear interest at Libor plus 275 bps.

After the acquisition closes, loans under the term loan A and A-1 facilities will require quarterly amortization payments of 1.25%, and borrowings under the term loan B will require quarterly amortization payments of 0.25%, in each case with all remaining principal due at maturity.

The term loan facilities also require mandatory prepayments in connection with asset sales and debt issuances and out of excess cash flow, among other things.

The term loan B has 101 soft call protection for one year, as previously noted.

The new revolver is designed to replace the company’s current revolver. Up to $100 million of the new revolver will be available for swingline loans, and up to $400 million will be available for the issuance of letters of credit.

The term loan A and A-1 facilities and the revolver require the company to maintain a maximum total leverage ratio of not more than 5.00 to 1.00 for the first two years after the closing date of the acquisition and 4.75 to 1.00 after that and a minimum consolidated interest coverage ratio of at least 2.00 to 1.00.

Closing of the acquisition is expected by the end of the third quarter.

CenturyLink is a Monroe, La.-based communications, hosting, cloud and IT services company. Level 3 is a Broomfield, Colo.-based provider of communications services to enterprise, government and carrier customers.

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