Long-Term Debt

12 Months Ended

Dec. 31, 2021

Debt Disclosure [Abstract]

Long-Term Debt

Long-Term Debt

The following chart reflects our consolidated long-term debt, including finance leases and other obligations, unamortized discounts and premiums, net and unamortized debt issuance costs, but excluding intercompany debt:

	Interest Rates (1)	Maturities (1)	December 31, 2021		December 31, 2020
			(Dollars in millions)
Level 3 Financing, Inc.
Senior Secured Debt: (2)
Senior notes	3.400% - 3.875%	2027 - 2029	$	1,500	1,500
Tranche B 2027 Term Loan (3)	LIBOR + 1.75%	2027	3,111		3,111
Senior Notes and Other Debt:
Senior notes (4)	3.625% - 5.375%	2025 - 2029	5,515		5,515
Finance leases and other obligations	Various	Various	319		255
Unamortized premiums, net			34		60
Unamortized debt issuance costs			(57)		(54)
Total long-term debt			10,422		10,387
Less current maturities			(26)		(14)
Long-term debt, excluding current maturities			$	10,396	10,373

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(1)As of December 31, 2021.

(2)See the remainder of this Note for a description of certain parent and subsidiary guarantees and liens securing this debt.

(3)The Tranche B 2027 Term Loan had an interest rate of 1.854% and 1.897% as of December 31, 2021 and December 31, 2020, respectively.

(4)This debt is fully and unconditionally guaranteed by certain affiliates of Level 3 Financing, inc., including Level 3 Parent, LLC and Level 3 Communications, LLC.

New Issuances

On January 13, 2021, Level 3 Financing, Inc. issued $900 million aggregate principal amount of its 3.750% Sustainability-Linked Senior Notes due 2029 (the "Sustainability-Linked Notes"). The net proceeds were used, together with cash on hand, to redeem certain of its outstanding senior note indebtedness. See "—Redemption of Senior Notes" below. The Sustainability-Linked Notes are guaranteed by Level 3 Parent, LLC and Level 3 Communications, LLC.

On August 12, 2020, Level 3 Financing, Inc. issued $840 million aggregate principal amount of its 3.625% Senior Notes due 2029 (the "2029 Notes"). The net proceeds from the offering were used to redeem certain of its outstanding senior note indebtedness. See "—Redemption of Senior Notes" below. The 2029 Notes are guaranteed by Level 3 Parent, LLC and Level 3 Communications, LLC.

On June 15, 2020, Level 3 Financing, Inc. issued $1.2 billion aggregate principal amount of its 4.250% Senior Notes due 2028 (the "2028 Notes"). The net proceeds from the offering were used to redeem certain of its outstanding senior note indebtedness. See "—Redemption of Senior Notes" below. The 2028 Notes are guaranteed by Level 3 Parent, LLC and Level 3 Communications, LLC.

Redemption of Senior Notes

On February 12, 2021, Level 3 Financing, Inc. redeemed all $900 million aggregate principal amount of its outstanding 5.375% Senior Notes due 2024.

On September 11, 2020, Level 3 Financing, Inc. redeemed the remaining $140 million aggregate principal amount of its outstanding 5.625% Senior Notes due 2023 and all $700 million aggregate principal amount of its 5.125% Senior Notes due 2023.

On July 15, 2020, Level 3 Financing, Inc. redeemed the remaining $840 million aggregate principal amount of its outstanding 5.375% Senior Notes due 2022 and $360 million aggregate principal amount of its outstanding 5.625% Senior Notes due 2023.

For the years ended December 31, 2021, 2020 and 2019, redemptions of senior notes resulted in a gain of $16 million, $27 million and $5 million, respectively.

Interest Expense

Interest expense includes interest on total long-term debt. The following table presents the amount of gross interest expense, net of capitalized interest:

	Years Ended December 31,
	2021		2020	2019
	(Dollars in millions)
Interest expense:
Gross interest expense	$	376	416	517
Capitalized interest	(15)		(23)	(15)
Total interest expense	$	361	393	502

Senior Secured Term Loan

As of December 31, 2021, Level 3 Financing, Inc. owed $3.1 billion under a senior secured Tranche B 2027 Term Loan, which matures on March 1, 2027. The Tranche B 2027 Term Loan carries an interest rate, in the case of base rate borrowings, equal to (i) the greater of the Prime Rate, the Federal Funds Effective Rate plus 50 basis points, or LIBOR plus 100 basis points (with all such terms and calculations as defined or further specified in the credit agreement) plus (ii) 0.75% per annum. Any Eurodollar borrowings under the Tranche B 2027 Term Loan bear interest at LIBOR plus 1.75% per annum.

The Tranche B 2027 Term Loan requires certain specified mandatory prepayments in connection with certain asset sales and other transactions, subject to certain significant exceptions. The obligations of Level 3 Financing, Inc. under the Tranche B 2027 Term Loan were, subject to certain exceptions, secured by certain assets of Level 3 Parent, LLC and certain of its material domestic subsidiaries. Also, Level 3 Parent, LLC and certain of its subsidiaries have guaranteed the obligations of Level 3 Financing, Inc. under the Tranche B 2027 Term Loan. Additional secured term loans or revolving credit may in the future be extended to Level 3 Financing, Inc. under its credit agreement dated as of March 13, 2007, as amended on November 29, 2019.

Senior Notes

All of the notes of Level 3 Financing, Inc. reflected in the table above pay interest semiannually and allow for the redemption of the notes at the option of the issuer, in whole or in part, (i) pursuant to a fixed schedule of pre-established redemption prices, (ii) pursuant to a “make whole” redemption price or (iii) under certain other specified limited circumstances in connection with certain sales of equity securities. For purposes of early redemption, all of the notes reflected in the table above, excluding the Senior Notes due 2025 and Senior Notes due 2026, allow for the redemption of the notes at the option of the issuer upon not less than 10 or more than 60 days prior notice. For purposes of early redemption, the Senior Notes due 2025 and Senior Notes due 2026, allow for the redemption of the notes at the option of the issuer upon not less than 30 or more than 60 days prior notice. For specific details of these features and requirements, including the applicable premiums and timing, refer to the indentures setting forth the specific terms of each respective series of the senior notes of Level 3 Financing, Inc.

Long-Term Debt Maturities

Set forth below is the aggregate principal amount of our long-term debt as of December 31, 2021 (excluding unamortized premiums, net, unamortized debt issuance costs and intercompany debt) maturing during the following years:

	(Dollars in millions)
2022	$	26
2023	27
2024	32
2025	838
2026	811
2027 and thereafter	8,711
Total long-term debt	$	10,445

Letters of Credit

It is customary for us to use various financial instruments in the normal course of business. These instruments include letters of credit. Letters of credit are conditional commitments issued on our behalf in accordance with specified terms and conditions. As of December 31, 2021 and 2020, we had outstanding letters of credit or other similar obligations of approximately $9 million and $18 million, respectively, of which $5 million and $11 million were collateralized by restricted cash. None of our conditional commitments under our outstanding letters of credit are reflected as debt on our balance sheets.

Covenants

The term loan and senior notes of Level 3 Financing, Inc. contain extensive affirmative and negative covenants. Such covenants include, among other things and subject to certain significant exceptions, restrictions on their ability to declare or pay dividends, repay certain other indebtedness, create liens, incur additional indebtedness, make investments, engage in transactions with their affiliates including Lumen Technologies and its other subsidiaries, dispose of assets and merge or consolidate with any other person. Also, in connection with a "change of control" of Level 3 Parent, LLC, or Level 3 Financing, Inc., Level 3 Financing will be required to offer to repurchase or repay certain of its long-term debt at a price of 101% of the principal amount of debt repurchased or repaid, plus accrued and unpaid interest.

The debt covenants applicable to us and our subsidiaries could have a material adverse effect on their ability to operate or expand their respective businesses, to pursue strategic transactions, to transfer cash to or engage in transactions with their unconsolidated affiliates, or to otherwise pursue their plans and strategies.

Certain of Lumen's and our debt instruments contain cross acceleration provisions. When present, these provisions could have a wider impact on liquidity than might otherwise arise from a default or acceleration of a single debt instrument.

Our ability to comply with the financial covenants in our debt instruments could be adversely impacted by a wide variety of events, including unforeseen contingencies, many of which are beyond our control.

Compliance

As of December 31, 2021 and December 31, 2020, we believe we were in compliance with the provisions and financial covenants contained in our debt agreements in all material respects.