Buffett’s Berkshire Hathaway, two others invest $500 million in Level 3

Level 3 Communications today expects to close on $500 million in new capital to be used for potential acquisitions.

Though the company has not named any specific companies or assets it is interested in acquiring, it indicated that distressed assets would be targeted. “The ongoing shakeout is creating extraordinary opportunities, as telecommunications companies, their network assets and customer bases become available,” said Level 3 CEO James Crowe in a press release.

The capital is being raised in the form of 9% convertible subordinated notes due in 2012. At the option of the holder, the notes can be converted into common stock at a price of $3.41 per share. The notes can be converted into preferred stock at the company’s option, subject to certain conditions.

Three parties will participate in the bond sale: Longleaf Partners Funds is purchasing $300 million and Legg Mason is purchasing $100 million. Berkshire Hathaway, the investment firm led by Warren Buffett, will purchase the remaining $100 million.

The funding in general and the involvement of Buffett’s firm in particular, which stayed out of telecom and technology even during the boom of the late ’90s, is seen as a significant vote of confidence by the markets. The company’s stock is up more than 70% to $4.93 on the news.

--Toby Weber, Staff Writer