Level 3 issues $325 million in bonds

Two weeks after wiping half a billion in debt from its books, Level 3 Communications today announced plans to issue $325 million in bonds to raise capital for future operations costs and possible expansion plans.

Level 3 today said it has priced the 2.875% convertible senior notes in a public offer underwritten by CitiGroup, Credit Suisse First Boston, JPMorgan, Merrill Lynch and Morgan Stanley. Level 3 first announced plans for the new debt on Monday, but today increased the size of the principal by $75 million.

A Level 3 spokesman said that the funds have not been earmarked for any specific projects, but the company could use them as operation capital, network buildouts, acquisition or consolidation funds, or may even use the cash to retire older, more expensive debt.

“Level 3 is moving from playing defense to playing offense,” the spokesman said. “We’re continuing to evaluate consolidation and growth opportunities. The net proceeds from [the bonds] could be used for either one of those ends.”

In June, Level 3 eliminated $457 million in long-term debt by converting the debt notes of its three major institutional investors into 27 million shares of common stock. The move eliminated $41 million in annual debt payments and lowered its overall debt to $5.8 billion.

The notes priced today will be due in 2010 and have a conversion price of $7.18 per share. Level 3 expects to finish the offering next week.