Fitch applies BBB- to Qwest notes

Fitch Ratings said it maintained the BB+ issuer default ratings assigned to CenturyLink, Inc. and its subsidiaries on Rating Watch Negative.

In addition, the agency assigned a BBB-/RR2 rating to wholly owned subsidiary Qwest Corp.'s offering of senior unsecured notes due 2057.

Net proceeds, together with cash on hand or additional intercompany borrowings, are expected to be used to redeem Qwest’s $500 million of 6½% senior notes due 2017 and $289 million of 7.5% senior notes due 2051.

In October 2016, CenturyLink and Level 3 Communications, Inc. entered into a definitive agreement where CenturyLink will acquire Level 3 in a cash and stock transaction. Level 3’s existing debt will remain outstanding.

To fund the transaction, CenturyLink has $10.2 billion in secured financing commitments, including a $2 billion revolver. The remaining $8.2 billion of other secured facilities includes $850 million of financing for debt maturing at CenturyLink prior to the expected close of the transaction and $300 million of financing for Level 3 senior notes due 2018. Subject to regulatory approval, the secured financing is expected to be guaranteed by existing CenturyLink subsidiaries (including Embarq Corp.), except for Qwest, and by a new holding company to be formed and become Level 3’s parent.

The stock of Level 3 and Qwest are expected to be pledged as collateral for the facilities.

Fitch said it expects the transaction to close by the end of the third quarter of 2017, following customary regulatory approvals. CenturyLink and Level 3 received shareholder approvals in March 2017.

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