Feb. 1, 2002 -- Level 3 Communications today sought to reassure nervous customers, issuing a public denial of market rumors that the company would file for Chapter 11 bankruptcy protection.
"Based on our financial situation as it exists today, we do not envision any scenario whereby Level 3 would have a payment default with respect to not only our senior secured credit facility, but also any other Level 3 debt," Level 3 CEO James Q. Crowe said in a statement.
"As a consequence, we also do not anticipate a scenario under which Level 3 would expect to seek protection from its creditors under the bankruptcy statutes," he added.
The unusual statement comes after Level 3 said Tuesday that it is entering talks with creditors to find an "appropriate solution" for potential violations of loan covenants. Level 3 said its revenue projections raised the possibility that a violation could occur by June 30.
Crowe noted that the covenants in question involved financial performance, not Level 3's ability to repay its $1.7 billion senior credit facility. But he seemed keenly aware that the company's statement, coming on the heels of Monday's bankruptcy by Global Crossing, has shaken an already troubled marketplace.
"This statement has obviously caused concern on the part of a number investors, which has been further exacerbated by press reports that seem to indicate that Level 3 was giving some sort of implied notice of an impending filing for protection from its creditors under the federal bankruptcy statutes," said Crowe. "This is an incorrect interpretation of our statement.
"This speculation is no doubt fueled by the spate of bankruptcy filings in the telecommunications sector, including two this very week," he added, referring to Global Crossing and McLeod. "A number of parties have asked why Level 3 is different from other companies in our sector that gave notice of potential covenant violations and in very short order filed for protection from their creditors under the Federal bankruptcy laws.
"We believe that there are clear differences between our company and those that have sought bankruptcy protection," Crowe said. "We believe that the company's ability to service its debt, absent economic improvement, has been enhanced significantly over the course of the past year."
Crowe said Level 3 had entered talks with JP Morgan Chase, the administrative agent for the bank credit facility, to discuss modifications to the agreement.
`We believe we will be able to resolve these issues prior to any covenant violation," Crowe concluded.
Denver-based Level 3 offers bandwidth services in North America, Europe and Asia, providings ervices in 50 data centers.
.