Sale of Data Centers and Colocation Business

3 Months Ended

Mar. 31, 2017

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure

Sale of Data Centers and Colocation Business

On November 3, 2016, we entered into a definitive stock purchase agreement to sell our data centers and colocation business to a consortium led by BC Partners, Inc. and Medina Capital in exchange for cash and a minority stake in the consortium's newly-formed global secure infrastructure company, Cyxtera Technologies. The sale received final regulatory approval in April and closed on May 1, 2017.

We received initial pre-tax cash proceeds of $1.86 billion, which is subject to customary post-closing adjustments. We plan to use a portion of these after-tax net cash proceeds to partly fund our acquisition of Level 3.

As a result of the sale, we classified the following assets and liabilities as assets held for sale and liabilities associated with the assets held for sale, respectively, on our consolidated balance sheet as of March 31, 2017:

	Dollars in millions
Goodwill	$	1,141
Property, plant and equipment	1,068
Other intangible assets	258
Other assets	37
Impairment on assets held for sale	(11		)
Total amount classified as assets held for sale(1)	$	2,493
Capital lease obligations	$	297
Other liabilities	109
Total liabilities associated with assets held for sale	$	406

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⁽¹⁾  A portion of the assets equivalent to the estimated fair value of our anticipated minority stake in Cyxtera Technologies is reflected in non-current other assets on our consolidated balance sheet as of March 31, 2017.

Effective with the date we entered into the agreement to sell the data centers and colocation business, we ceased recording depreciation of the property, plant and equipment to be sold and amortization of the intangible assets. We estimate that we would have recorded $50 million of depreciation and amortization expense in the first quarter of 2017 if we had not met the held-for-sale criteria.

After factoring in the costs to sell the data centers and colocation business, we estimate the net carrying value of the assets and liabilities sold exceeded the value of the proceeds we received by approximately $11 million, which was recorded as an impairment loss in selling, general and administration expenses of our consolidated statement of operations for the three months ended March 31, 2017. We further estimate, due to the sale and related corporate actions we have taken regarding certain subsidiaries involved in the data centers and colocation business, that we will trigger tax expense relating to the sale totaling approximately $75 million to $150 million, $18 million of which was accrued in 2016, $15 million of which was accrued in the three months ended March 31, 2017, with the remainder to be expensed in the three months ending June 30, 2017.