Fitch reviews CenturyLink, affirms Level 3

Fitch Ratings said it placed the BB+ long-term issuer default ratings of CenturyLink Inc. and its subsidiaries on Rating Watch Negative.

The action affects about $19.9 billion of debt outstanding as of June 30.

The agency affirmed the long-term issuer default rating of Level 3 Communications, Inc. and its wholly owned subsidiary Level 3 Financing, Inc. at BB.

The outlook remains stable. The action affects about $11 billion of debt outstanding as of June 30.

CenturyLink and Level 3 Communications have a definitive agreement whereby CenturyLink will acquire Level 3 Communications in a cash and stock transaction; Level 3 Communications’s existing debt will remain outstanding.

The cash portion of the transaction, which is about 60%, will be financed by roughly $7 billion in incremental, senior secured debt as well as cash on hand at both companies. The transaction is expected to close by the end of the third quarter of 2017.

Fitch said it views the acquisition positively from a strategic perspective. The two companies combined will create the second largest enterprise service provider in the U.S. and should benefit from the enhanced scale and operating synergies over time. Post-acquisition, CenturyLink will also have an extensive international network.

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