Level 3 Bonds Have Likely Levelled Off

Heavily leveraged Level 3 Inc. has watched its stock drop 75% since the spring and its bonds sink into distressed territory, even after the company posted a much smaller loss than analysts expected. But some high yield sources predicted the unique, highly specialized broadband Internet Protocol technology networker’s bonds are on the slow road upwards and make a good investment in light of an upcoming telecommunications industry shakeout. Last week, Level 3’s $834 million in 10.5% senior discounted notes were trading at 54.5 and its $2 billion in 9.13% seniors were at 79. The bonds have been falling since September and continued downward on the mid-October quarterly earnings announcement that the firm had lost $323 million, or 20% less than estimates, on revenue of $341 million in the third quarter. By comparison, Level 3 generated revenue of $134 million and a loss of $147 million in the year-prior quarter.