Long-Term Debt

As of March 31, 2012 and December 31, 2011, long-term debt was as follows:



(dollars in millions)	March 31, 2012			December 31, 2011
Senior Secured Term Loan*	$	2,600		$	2,600
Senior Notes due 2014 (9.25%)	—			807
Floating Rate Senior Notes due 2015 (4.506% as of March 31, 2012 and 4.202% as of December 31, 2011)	300			300
Senior Notes due 2017 (8.75%)	700			700
Senior Notes due 2018 (10.0%)	640			640
Senior Notes due 2019 (11.875%)	605			605
Senior Notes due 2019 (9.375%)	500			500
Senior Notes due 2019 (8.125%)	1,200			1,200
Senior Notes due 2020 (8.625%)	900			—
Convertible Senior Notes due 2013 (15.0%)	172			272
Convertible Senior Notes due 2015 (7.0%)	200			200
Convertible Senior Notes due 2015 Series B (7.0%)	275			275
Convertible Senior Notes due 2016 (6.5%)	201			201
Commercial Mortgage due 2015 (9.86%)	64			65
Capital Leases	115			131
Other	30			32
Total Debt Obligations	8,502			8,528
Unamortized (Discount) Premium:
Discount on Senior Secured Term Loan	(32		)	(33		)
Premium on Senior Notes due 2014 (9.25%)	—			3
Discount on Senior Notes due 2018 (10.0%)	(10		)	(11		)
Discount on Senior Notes due 2019 (11.875%)	(10		)	(10		)
Discount on Senior Notes due 2019 (9.375%)	(9		)	(9		)
Discount on Senior Notes due 2019 (8.125%)	(9		)	(9		)
Discount on Convertible Senior Notes due 2015 (7.0%)	(2		)	(2		)
Discount due to embedded derivative contracts	(4		)	(7		)
Total Unamortized (Discount) Premium	(76		)	(78		)
Carrying Value of Debt	8,426			8,450
Less current portion	(227		)	(65		)
Long-term Debt, less current portion	$	8,199		$	8,385

* The $1.4 billion Tranche A Term Loan due 2014 had an effective interest rate of 2.73% and 2.65% as of March 31, 2012 and December 31, 2011, respectively, excluding the effect of the $1 billion notional amount interest rate swaps. The $650 million Tranche B II Term Loan due 2018 and the $550 million Tranche B III Term Loan due 2018 had an interest rate of 5.75% as of March 31, 2012 and December 31, 2011.

First Quarter 2012 Debt Issuance and Related Redemption

8.625% Senior Notes due 2020

On January 13, 2012, Level 3 Financing completed the offering of $900 million aggregate principal of its 8.625% Senior Notes due 2020 (the "8.625% Senior Notes"). Debt issuance costs of approximately $20 million were capitalized and are being amortized over the term of the 8.625% Senior Notes. In February 2012, a portion of the net proceeds from the offering of the 8.625% Senior Notes were used to redeem all of Level 3 Financing's outstanding 9.25% Senior Notes due 2014 in aggregate principal amount of $807 million. The Company recognized a loss on extinguishment of debt of $22 million in the first quarter of 2012 as a result of the redemption of the 9.25% Senior Notes due 2014.

The remaining net proceeds constitute purchase money indebtedness under the existing senior secured credit agreement and indentures of the Company and Level 3 Financing and are being used solely to fund the cost of construction, installation, acquisition, lease, development or improvement of any Telecommunications/IS assets (as defined in the existing senior secured credit agreement and indentures of Level 3), including cash purchase price of any past, pending or future acquisitions.

The 8.625% Senior Notes will mature on July 15, 2020. Interest on the notes will accrue from January 13, 2012 and will be payable on January 15 and July 15 of each year, beginning on July 15, 2012. The notes are fully and unconditionally guaranteed on an unsubordinated and unsecured basis by the Company and became fully and unconditionally guaranteed by Level 3 Communications, LLC in the second quarter of 2012 (see Note 13 - Subsequent Events). The notes are unsecured, unsubordinated obligations of Level 3 Financing, ranking equal in right of payment with all existing and future unsubordinated indebtedness of Level 3 Financing, and are senior in right of payment to all existing and future indebtedness of Level 3 Financing expressly subordinated in right of payment to the notes.

The 8.625% Senior Notes are subject to redemption at the option of Level 3 Financing in whole or in part, at any time before January 15, 2016 at the redemption price equal to 100% of their principal amount, plus a make-whole premium and accrued an unpaid interest. On and after January 15, 2016, Level 3 Financing may redeem all or part of the 8.625% Senior Notes, upon not less than 30 nor more than 60 days' prior notice, at the redemption prices set forth below (expressed as a percentage of principal amount), plus accrued and unpaid interest thereon (if any) to, but not including, the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the twelve months beginning January 15, of the years indicated below:



Year	Redemption Price
2016	104.313	%
2017	102.156	%
2018	100.000	%

In addition, at any time or from time to time on or prior to January 15, 2015, Level 3 Financing may redeem up to 35% of the original aggregate principal amount of the 8.625% Senior Notes (including any additional 8.625% Senior Notes) at a redemption price equal to 108.625% of the principal amount of the 8.625% Senior Notes so redeemed, plus accrued and unpaid interest thereon (if any) to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), with the net cash proceeds contributed to the capital of Level 3 Financing of one or more private placements to persons other than Affiliates of Level 3 or underwritten public offerings of Common Stock of Level 3 resulting, in each case, in gross proceeds of at least $100 million in aggregate; provided, however, that at least 65% of the original aggregate principal amount of the 8.625% Senior Notes (including any additional 8.625% Senior Notes) would remain outstanding immediately after giving effect to such redemption. Any such redemption shall be made within 90 days of such private placement or public offering upon not less than 30 nor more than 60 days' prior notice.

First Quarter 2012 Debt Exchange

On March 13, 2012, the Company entered into an exchange agreement for a portion of its 15% Convertible Senior Notes due 2013. Pursuant to the agreement, the holder of approximately $100 million aggregate principal amount of Level 3's outstanding 15% Convertible Senior Notes due 2013 agreed to exchange that debt for approximately 3.7 million shares of Level 3's common stock into which the notes were convertible plus an additional 1.7 million shares for a total of approximately 5.4 million shares. The consideration was based on the market price for these notes plus an inducement premium and included a payment for accrued and unpaid interest from January 15, 2012 through March 15, 2012 of approximately $2 million. This transaction did not include the payment by the Company of any cash. The Company recognized a loss on inducement included in loss on extinguishment of debt of $39 million in the first quarter of 2012 as a result of the exchange of the 15% Convertible Senior Notes due 2013.

Long-Term Debt Maturities

Aggregate future contractual maturities of long-term debt and capital leases (excluding issue discounts, premiums and fair value adjustments) were as follows as of March 31, 2012 (dollars in millions):



2012 (remaining nine months)	$	47
2013	212
2014	1,425
2015	838
2016	207
2017	706
Thereafter	5,067
	$	8,502