DBRS Revises Trend on Level 3 to Stable from Positive

DBRS has today revised its trend on Level 3 Communications Inc. (Level 3 or the Company) and its wholly-owned finance subsidiary, Level 3 Financing Inc., to Stable from Positive.

While DBRS believes that the anticipated structural improvement in the Company’s business risk profile will continue as expected for 2008 and into 2009 despite the current economic downturn, DBRS believes that there is a risk that the Company will continue to have limited access to the capital markets. DBRS continues to believe that Level 3 will reach an inflection point in 2009 where for the first time in the Company’s history it will generate enough EBITDA on an annual basis to cover its interest and capex requirement and therefore generate positive free cash flow.

DBRS notes that despite recent initiatives that have served to reduce and extend some of the Company’s 2009 to 2012 maturities Level 3 will continue to require access to the capital markets in order to refinance its 2010 maturities. This could continue to remain a challenge should the credit markets remain frozen for all of 2009 and into 2010.

DBRS notes that, as at September 30, 2008 (pro forma for its recent tender offer) Level 3 has enough liquidity (roughly $560 million in cash) which will cover all of its 2009 maturities. After the Company’s recent equity for debt exchanges and its current debt tender offer and refinancing, Level 3’s 2009 debt maturities are likely to be reduced from $327 million at September 30, 2008 to roughly $174 million.

Note:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Telecommunications, which can be found on our website under Methodologies.

This is a Corporate rating.