LVLTLevel 3 Communications, Inc. (stock abbreviation, AMEX)
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Moreover, based on the company's ability to realize anticipated operating cost synergies, the GLBC acquisition positions LVLT to further improve its credit profile and generate consistent levels of free cash flow.
LVLT continues to expect total integration expenses of approximately $100 million in 2007 (excluding $75 to $100 million of capital expenditures related to integration) and to exit 2007 with $200 million of annualized synergies.
LVLT had approximately $768 million of cash on hand as of year end 2008, which coupled with the proceeds from the term loan B facility along with Fitch's expectation that LVLT generates positive free cash flow during 2009, more than adequately positions the company to satisfy approximately $769 million of maturing indebtedness during 2009 and 2010.
After the close of the exchange, expected to occur before the end of the second quarter, and considering the open market debt repurchases, LVLT has a total of $241 million of debt maturing during the balance of 2009 and 2010.
Indicative of the synergies LVLT has achieved, the company expanded its consolidated EBITDA margins by 910 basis points (bps) since the end of the first quarter of 2007.
While Fitch acknowledges the success LVLT has experienced managing its cost structure to maintain gross and EBITDA margins, EBITDA and free cash flow growth has not matched Fitch's expectations or led to the anticipated strengthening of LTLV's credit profile.
Fitch's Issuer Default Rating (IDR) for both LVLT and Level 3 Financing is 'B' with a Positive Rating Outlook.
A revision to a Stable Rating Outlook at the current rating level would occur with LVLT experiencing difficulty or delay in fully integrating GLBC and achieving anticipated cost synergies.
LVLT anticipates the transaction will yield annualized cost synergies of approximately $340 million including annualized capital expenditure reduction of $40 million.
1 billion (calculation includes LVLT and GLBC cash as of June 30 as well as net cash generated from financing activities related to the close of the GLBC acquisition) as of June 30, 2011 on a pro forma basis.
Based on its expectation for stable operating margins and capital intensity metrics substantially similar to those experienced during 2010, Fitch does not expect LVLT to generate positive free cash flow during 2011 and for the company to generate a minimal amount (less than $50 million) during 2012.
Through the first nine months of 2010, LVLT increased its capital intensity to 11.