Long-Term Debt and Credit Facilities

Long-term debt, including unamortized discounts and premiums and unamortized debt issuance costs, consisting of borrowings by CenturyLink, Inc. and certain of its subsidiaries, including CenturyLink Escrow, LLC, Qwest Corporation, Qwest Capital Funding, Inc. and Embarq Corporation and its subsidiaries ("Embarq"), were as follows:



	Interest Rates	Maturities	As of June 30, 2017			As of December 31, 2016
			(Dollars in millions)
CenturyLink, Inc.
Senior notes	5.625% - 7.650%	2019 - 2042	$	8,125		8,975
Credit Facility and revolving line of credit⁽¹⁾	—%	2019	—			370
Term loan	2.980%	2019	325			336
Subsidiaries
CenturyLink Escrow, LLC
Term loan "B"⁽²⁾	1.375%	2025	6,000			—
Qwest Corporation
Senior notes	6.125% - 7.750%	2021 - 2057	7,294			7,259
Term loan	2.980%	2025	100			100
Qwest Capital Funding, Inc.
Senior notes	6.500% - 7.750%	2018 - 2031	981			981
Embarq Corporation and subsidiaries
Senior note	7.995%	2036	1,485			1,485
First mortgage bonds	7.125% - 8.770%	2017 - 2025	223			223
Other	9.000%	2019	150			150
Capital lease and other obligations⁽³⁾	Various	Various	766			440
Unamortized discounts, net			(166		)	(133	)
Unamortized debt issuance costs			(206		)	(193	)
Total long-term debt			25,077			19,993
Less current maturities not associated with assets held for sale			(196		)	(1,503	)
Less capital lease obligations associated with assets held for sale			—			(305	)
Long-term debt, excluding current maturities and capital leases obligations associated with assets held for sale			$	24,881		18,185

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⁽¹⁾	The aggregate amount outstanding on our Credit Facility and revolving line of credit borrowings at December 31, 2016 was $370 million with a weighted-average interest rate of 4.500%. At June 30, 2017, we had no borrowings outstanding under our Credit Facility or revolving line of credit. These amounts change on a regular basis.


⁽²⁾	Represents the fixed rate in effect at June 30, 2017. Please see "Level 3 Financing Credit Agreement" for information on future rates.

⁽³⁾

As a result of not meeting the sale leaseback accounting requirements, we must treat a certain amount of the pre-tax cash proceeds from the sale of our real estate assets as though it were the result of a financing obligation on our consolidated balance sheet. Also, the capital lease obligations that were shown as held for sale as of December 31, 2016 are retained. Please see Note 3—Sale of Data Centers and Colocation Business for additional information on our preliminary estimate of the financing obligation.

New Issuances

On April 27, 2017, Qwest Corporation issued $575 million aggregate principal amount of 6.75% Notes due 2057 and, on May 5, 2017, issued an additional $85 million aggregate principal amount of such notes pursuant to an over-allotment option in exchange for aggregate net proceeds, after deducting underwriting discounts and other expenses, of $638 million. All of the 6.75% Notes are senior unsecured obligations and may be redeemed by Qwest Corporation, in whole or in part, on or after June 15, 2022, at a redemption price equal to 100% of the principal amount redeemed plus accrued and unpaid interest to the redemption date.

Repayments

On June 15, 2017, CenturyLink, Inc. paid at maturity the $350 million principal and accrued and unpaid interest due under its 5.15% Notes.

On May 9, 2017, Qwest Corporation redeemed $125 million aggregate principal amount of the remaining $288 million of its 7.5% Notes due 2051, which resulted in an immaterial loss.

On May 4, 2017, Qwest Corporation redeemed all $500 million of its 6.5% Notes due 2017, which resulted in an immaterial loss.

On April 3, 2017, CenturyLink, Inc. paid at maturity the $500 million principal and accrued and unpaid interest due under its 6.00% Notes.

Level 3 Financing Credit Agreement

To fund a substantial portion of its pending acquisition of Level 3, on June 19, 2017, CenturyLink, Inc. caused its wholly-owned subsidiary, CenturyLink Escrow, LLC (the "Escrow Borrower"), to enter into a credit agreement (the "Credit Agreement") with, among others, Bank of America, N.A., as administrative agent and collateral agent, providing for $9.945 billion in senior secured credit facilities (the "New Senior Secured Credit Facilities"). These facilities consist of (i) a $2 billion revolving credit facility (“the New Revolving Credit Facility”), which is expected to have 18 lenders, each with commitments ranging from $32.8 million to $167.8 million; (ii) a $1.575 billion senior secured term loan “A” credit facility, which is expected to have 17 lenders, each with commitments ranging from $28.6 million to $132.2 million; (iii) a $370 million senior secured term loan “A-1” credit facility with CoBank, ACB; and (iv) a $6 billion senior secured term loan “B” credit facility, which was fully funded into escrow on June 19, 2017. These escrowed debt proceeds, together with pre-funded amounts in escrow to cover interest payments, are reflected as “restricted cash” in our consolidated balance sheet as of June 30, 2017.

We intend to use the proceeds of borrowings under the New Senior Secured Credit Facilities, together with other available funds, to fund the cash portion of the consideration and transaction costs payable in connection with the Level 3 acquisition, to refinance existing indebtedness, and for other general corporate purposes. The New Revolving Credit Facility and borrowings under the Term Loan A and A-1 facilities will mature five years after the closing of the Level 3 acquisition. Borrowings under the Term Loan B facility will mature on January 31, 2025.

The proceeds of the borrowings under the Term Loan B facility, net of an original issue discount of 0.5%, will continue to be held in escrow prior to the closing of the Level 3 acquisition. Once all applicable conditions with respect to the Level 3 acquisition and the Credit Agreement have been met, CenturyLink, Inc. (i) will assume the Escrow Borrower’s rights and obligations as the borrower under the New Senior Secured Credit Facilities, (ii) will borrow funds under the Term Loan A and A-1 facilities and (iii) will have the ability to borrow funds under the New Revolving Credit Facility, in each case on the terms and conditions specified in the Credit Agreement.

Loans under the Term Loan A and A-1 facilities and the New Revolving Credit Facility will bear interest at a rate equal to, at our option, the London Interbank Offered Rate (“LIBOR”) or the alternative base rate (each as defined in the Credit Agreement) plus an applicable margin between 2.25% to 3.00% per annum for LIBOR loans and 1.25% to 2.00% per annum for alternative base rate loans, depending on our then current total leverage ratio. Borrowings under the Term Loan B facility bore interest at 1.375% per annum through July 18, 2017 and will bear interest at 2.75% per annum thereafter through the consummation date of the Level 3 acquisition. Upon consummation of the Level 3 acquisition, borrowings under the Term Loan B facility will bear interest at LIBOR plus 2.75% per annum. After the closing of the Level 3 acquisition, loans under each of the term loan facilities will require certain specified quarterly amortization payments and certain specified mandatory prepayments in connection with certain asset sales and debt issuances and out of excess cash flow, among other things, subject in each case to certain significant exceptions.

Upon consummation of the Level 3 acquisition, all of our obligations under the New Senior Secured Credit Facilities are expected to be guaranteed by certain of our subsidiaries. The guarantees by certain of those guarantors are expected to be secured by a first priority security interest in substantially all assets directly owned by them, subject to certain exceptions and limitations.

The New Revolving Credit Facility is designed to replace our current revolving credit facility. A portion of the New Revolving Credit Facility in an amount not to exceed $100 million will be available for swingline loans and a portion in an amount not to exceed $400 million will be available for the issuance of letters of credit. Upon the closing of the Level 3 acquisition, CenturyLink, Inc.'s existing term loan with CoBank, ACB that is scheduled to mature in 2019 will be paid, and CenturyLink, Inc. will enter into term loan "A-1" with the same lender. Upon consummation of the Level 3 acquisition, CenturyLink, Inc. will be obligated to pay certain specified commitment and fees under the New Senior Secured Credit Facilities.

With respect to the Term Loan A and A-1 facilities and the New Revolving Credit Facility, the Credit Agreement requires us to maintain (i) a maximum total leverage ratio of not more than 5.00 to 1.00 between the closing date of the Level 3 acquisition and the second anniversary thereof and 4.75 to 1.00 thereafter and (ii) a minimum consolidated interest coverage ratio of at least 2.00 to 1.00, with such ratios being determined and calculated in the manner described in the Credit Agreement.

The New Senior Secured Credit Facilities contain various representations and warranties and affirmative and negative covenants that apply, in certain circumstances, before and after the closing of the Level 3 acquisition. Such covenants include, among other things and subject to certain significant exceptions, restrictions on our ability to declare or pay dividends, repurchase stock, repay certain other indebtedness, create liens, incur additional indebtedness, make investments, engage in transactions with its affiliates, dispose of assets and merge or consolidate with any other person.

There is a risk that the funding conditions for the New Senior Secured Credit Facilities (which include the completion of the Level 3 acquisition) will not be satisfied, and that the debt financing may not be available when required. In addition, we have the right to substitute the proceeds of other debt financing, or commitments for other debt financing, for all or any portion of these credit facilities. As of the date of this report, no such other debt financing has been arranged.

Covenants

As of June 30, 2017, we believe we were in compliance with the provisions and covenants contained in our Credit Facility, Credit Agreement and other material debt agreements.