Long-Term Debt

12 Months Ended

Dec. 31, 2024

Debt Disclosure [Abstract]

Long-Term Debt

Note 7—Long-Term Debt

The following table 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:

			As of December 31,
	Interest Rates (1)	Maturities (1)	2024		2023
			(Dollars in millions)
Level 3 Financing, Inc.
Senior Secured Debt(2):
New Facilities:
Term Loan B-1(3)	SOFR + 6.56%	2029	$	1,199	—
Term Loan B-2(3)	SOFR + 6.56%	2030	1,199		—
Former Facility(4)	SOFR + 1.75%	2027	12		2,411
First Lien Notes(5)	10.500% - 11.000%	2029 - 2030	3,846		925
Second Lien Notes	3.875% - 10.000%	2029 - 2032	2,579		—
Former Secured Notes(6)	N/A	N/A	—		1,500
Unsecured Senior Notes:
Senior notes(7)	3.400% - 4.625%	2027 - 2029	964		3,940
Finance leases and other obligations	Various	Various	229		259
Unamortized (discounts) premiums, net			(225)		2
Unamortized debt issuance costs			(138)		(54)
Total long-term debt			9,665		8,983
Less current maturities			(36)		(31)
Long-term debt, excluding current maturities			$	9,629	$	8,952

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N/A - Not applicable

(1)As of December 31, 2024. All references to "SOFR" refer to the Secured Overnight Financing Rate.

(2)As discussed further below in this Note, the debt listed under the caption “Senior Secured Debt” is secured by assets of Level 3 Financing and guaranteed on a secured basis by certain of its affiliates. As discussed further in footnote 6, we reclassified in the "December 31, 2024" column of the table above certain notes that were secured prior to the TSA Effective Date (as defined below) from "secured" to "unsecured" in light of amendments that released such prior security interests.

(3)The Term Loan B-1 and B-2 each had an interest rate of 11.133% as of December 31, 2024.

(4)Reflects Level 3 Tranche B 2027 Term Loan issued under a predecessor facility, which had an interest rate of 6.437% and 7.220% as of December 31, 2024 and December 31, 2023, respectively.

(5)Includes Level 3 Financing's 10.500% Senior Secured Notes due 2030 issued in early 2023, the terms of which have been amended to be consistent with Level 3 Financing's First Lien Notes issued on March 22, 2024.

(6)Two series of former Level 3 Senior Notes due in 2027 and 2029 bearing interest rates of 3.400% and 3.875% as of December 31, 2023, were amended on the TSA Effective Date in the manner discussed in Note 7—Long-Term Debt.

(7)The total debt for these notes at December 31, 2024 includes the remaining aggregate principal amount due under Level 3 Financing's Former Secured Notes, the terms of which were amended on March 22, 2024 to release the security interests relating thereto.

Long-Term Debt Maturities

Set forth below is the aggregate principal amount of our long-term debt as of December 31, 2024 (excluding unamortized (discounts) premiums, net, unamortized debt issuance costs and intercompany debt) maturing during the following years:

	(Dollars in millions)
2025	$	36
2026	35
2027	101
2028	197
2029	4,782
2030 and thereafter	4,877
Total long-term debt	$	10,028

2024 Debt Transactions

Cash Tender Offers

Pursuant to cash tender offers that commenced on November 12, 2024 (the "Cash Tender Offers"), in November 2024 we reduced the aggregate principal amount of our consolidated indebtedness by approximately $324 million. In conjunction with the Cash Tender Offers, we recorded a gain of $31 million including an offset of immaterial third-party fees in our aggregate Net gain on early retirement of debt in Other income, net in our consolidated statement of operations for the year ended December 31, 2024.

The following table sets forth the aggregate principal amount of each series of senior notes retired in exchange for cash in November 2024 in connection with the Cash Tender Offers:

Debt	Aggregate Principal Amount
	(Dollars in millions)
Level 3 Financing, Inc.
3.400% Senior Secured Notes due 2027 (unsecured)	$	1
4.625% Senior Notes due 2027	48
4.250% Senior Notes due 2028	275
Total	$	324

Exchange Offers

Pursuant to exchange offers that commenced on September 3, 2024 (the "Exchange Offers"), on September 24, 2024, Level 3 Financing issued approximately $350 million aggregate principal amount of its newly-issued 10.000% Second Lien Notes due 2032 in exchange for $357 million aggregate principal amount of two series of its outstanding senior unsecured notes maturing in 2027 (which were concurrently cancelled). These transactions reduced the aggregate principal amount of Level 3 Financing's consolidated indebtedness by approximately $7 million. The Company determined that the Exchange Offers constituted a debt modification consistent with ASC 470 and recorded no gain or loss. In conjunction with the Exchange Offers, we recorded $8 million of fees to Selling, general and administrative expense in our consolidated statements of operations for the year ended December 31, 2024.

The following table sets forth the aggregate principal amount of each series of senior unsecured notes of Level 3 Financing exchanged and retired on September 24, 2024 in connection with the Exchange Offers:

Debt	Aggregate Principal Amount
	(Dollars in millions)
Level 3 Financing, Inc.
3.400% senior secured notes due 2027 (unsecured)	$	77
4.625% senior notes due 2027	280
Total	$	357

Transaction Support Agreement Transactions

On March 22, 2024, the TSA Parties completed the TSA Transactions, including the termination, repayment or exchange of previous commitments and debt of Level 3 Financing and the issuance of new term loan facilities and notes by Level 3 Financing.

The following table sets forth the aggregate principal amount of (i) former debt of Level 3 Financing exchanged for new Level 3 Financing debt and (ii) new debt issued by Level 3 in exchange for former Level 3 debt (except as otherwise noted), in each case during the first quarter of 2024 in connection with the TSA Transactions:

Former notes or facility exchanged	New notes or facility issued	Aggregate principal amount exchanged/issued(1)
		(Dollars in millions)
Term Loan B	Term Loan B-1, B-2	$	2,398
3.400% Senior Notes due 2027	10.500% First Lien Notes due 2029	668
4.625% Senior Notes due 2027	4.875% Second Lien Notes due 2029	606
3.875% Senior Notes due 2029	10.750% First Lien Notes due 2030	678
4.250% Senior Notes due 2028	4.500% Second Lien Notes due 2030	712
3.625% Senior Notes due 2029	3.875% Second Lien Notes due 2030	458
3.750% Senior Notes due 2029	4.000% Second Lien Notes due 2031	453
N/A	11.000% First Lien Notes due 2029(2)	1,575
Total		$	7,548

______________________________________________________________________

N/A - Not applicable

(1)See our long-term debt table above for information on the amount of former debt that remains outstanding as of December 31, 2024.

In evaluating the terms of the TSA Transactions, we determined that for certain of our creditors the new debt instruments were substantially different than pre-existing debt and therefore constituted a non-cash extinguishment of old debt of $2.6 billion and the establishment of new debt for which we recorded a gain on extinguishment in the first quarter of 2024. This new debt was recorded at fair value generating a reduction to debt of $261 million which resulted in a net gain of $54 million, and is included in our aggregate Net gain on early retirement of debt in Other income, net in our consolidated statement of operations for the year ended December 31, 2024. The remaining creditors’ debt was not substantially different under the terms of the TSA Transactions and was treated under modification accounting rules. In conjunction with the TSA Transactions, we paid $209 million in lender fees and $112 million in additional third-party costs. Of these amounts, we offset $157 million of lender fees against the gain on extinguishment and recorded $61 million in third-party costs to Selling, general and administrative expense in our consolidated statement of operations for the year ended December 31, 2024. In accordance with GAAP provisions for modification and extinguishment accounting, $52 million in lender fees and $51 million in third-party costs, respectively, were capitalized and will be amortized over the terms of the newly-issued indebtedness.

Repurchases of Debt Instruments

During 2024, Level 3 Financing repurchased various debt instruments on the open market. These repurchases resulted in an aggregate net gain of $34 million which is included in our aggregate Net gain on early retirement of debt in Other income, net in our consolidated statement of operations for the year ended December 31, 2024. The following table sets forth the aggregate principal amount of each series of notes repurchased during the year ended December 31, 2024:

Debt	Principal Amount Repurchased (in millions)
Level 3 Financing, Inc.
4.250% Senior Notes due 2028	$	34
3.625% Senior Notes due 2029	81
3.750% Sustainability-Linked Senior Notes due 2029	86
3.875% Senior Secured Notes due 2029 (unsecured)	18
Total	$	219

2023 Debt Modification Transactions

Pursuant to exchange offers that commenced on March 16, 2023 (the “2023 Exchange Offers”), on March 31, 2023, Level 3 Financing issued $915 million of its 10.500% Senior Secured Notes due 2030 (the “10.500% Notes”) in exchange for $1.535 billion of Lumen’s outstanding senior unsecured notes.

On April 17, 2023, in connection with the 2023 Exchange Offers, Level 3 Financing issued an additional $9 million of its 10.500% Notes in exchange for $19 million of Lumen's outstanding senior unsecured notes.

Level 3 Financing Credit Agreements

Credit Agreement dated March 22, 2024

On the TSA effective date, Level 3 Financing, as borrower, Level 3 Parent, the lenders party thereto and Wilmington Trust, National Association, as administrative agent and collateral agent, entered into a credit agreement (the "New Level 3 Agreement"), providing for:

• a secured term B-1 loan facility in the principal amount of approximately $1.2 billion maturing April 15, 2029; and

•a secured term B-2 loan facility in the principal amount of approximately $1.2 billion maturing April 15, 2030

Interest on borrowings under the New Level 3 Agreement is payable at the end of each interest period

at a rate equal to, at Level 3 Financing’s option, term SOFR (subject to a 2.000% floor) plus 6.56% for term SOFR

loans or a base rate plus 5.56% for base rate loans.

Amounts outstanding under the New Level 3 Agreement may be prepaid at any time, subject to a premium of (i) 2.00% of the aggregate principal amount if prepaid on or prior to the 12-month anniversary of the TSA Effective Date and (ii) 1.00% of the aggregate principal amount if prepaid after the 12-month anniversary of the TSA Effective Date and on or prior to the 24-month anniversary of the TSA Effective Date. The New Level 3 Facilities require Level 3 to make certain specified mandatory prepayments upon the occurrence of certain transactions.

Former Facility

In connection with entering into the New Level 3 Agreement, substantially all of the indebtedness issued under Level 3 Financing’s amended and restated credit agreement dated as of November 29, 2019 (the “Former Level 3 Facility”) was repaid.

Level 3 Guarantees of Lumen Credit Agreements

Lumen’s obligations under its Superpriority Revolving/Term A Credit Agreement dated as of March 22, 2024 (the “RCF/TLA Credit Agreement”) are unsecured, but Level 3 Parent, Level 3 Financing and certain of Level 3 Financing's subsidiaries (collectively, the "Level 3 Collateral Guarantors") have provided an unconditional guarantee of payment of up to $150 million of Lumen’s obligations under both of the revolving credit facilities created under the RCF/TLA Credit Agreement. Certain of such guarantees will be secured by a lien on substantially all of the assets of the applicable Level 3 Collateral Guarantors. The guarantee by the Level 3 Collateral Guarantors may be reduced or terminated under certain circumstances.

Senior Notes

The Company’s consolidated indebtedness at December 31, 2024 included (i) first and second lien secured notes issued by Level 3 Financing and (ii) senior unsecured notes issued by Level 3 Financing. All of these notes carry fixed interest rates and all principal is due on the notes’ respective maturity dates, which rates and maturity dates are summarized in the table above. Level 3 Financing generally can redeem the notes, at its option, 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 conditions.

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, 2024 and 2023, we had outstanding letters of credit or other similar obligations of approximately $2 million, all of which were collateralized by restricted cash in each year. None of our conditional commitments under our outstanding letters of credit are reflected as debt on our balance sheets.

Certain Guarantees and Security Interests

Level 3 Financing’s obligations under the New Level 3 Agreement are secured by a first lien on substantially all of its assets. In addition, the other Level 3 Collateral Guarantors have provided an unconditional guarantee of payment of Level 3 Financing’s obligations under the New Level 3 Agreement secured by a lien on substantially all of their assets.

Level 3 Financing’s obligations under its first lien notes are secured by a first lien on substantially all of its assets (subject, in certain cases, to receipt of necessary regulatory approvals), and are guaranteed by the other Level 3 Collateral Guarantors (or, for certain such guarantors, for certain notes will be guaranteed upon the receipt of required regulatory approvals) on the same basis as the guarantees provided by such entities under the New Level 3 Agreement. Level 3 Financing’s obligations under its second lien notes are secured by a second lien on substantially all of its assets, and are guaranteed by the other Level 3 Collateral Guarantors on the same basis as the guarantees provided by such entities under the New Level 3 Agreement, except the lien securing such guarantees is a second lien.

Level 3 Financing's obligations under its unsecured notes are guaranteed on an unsecured basis by the same affiliated entities that guarantee the New Level 3 Agreement and secured notes.

Supplier Finance Program

Pursuant to our purchase of network equipment under a supplier finance program implemented in 2021 with one of our key equipment vendors, we are obligated to make quarterly installment payments over a five-year period and pay annual interest of 1.25% on unpaid balances. The first unsecured quarterly payment was due April 27, 2022, with remaining quarterly payments due through the end of the term on July 1, 2026. The supplier also agreed to certain milestone performance and other provisions that could result in us earning credits to be applied by us towards future equipment purchases. As of December 31, 2024 and 2023, we have received approximately $24 million and $15 million of credits, respectively.

Changes in our supplier finance program outstanding obligations were as follows:

	Years Ended December 31,
	2024		2023
	(Dollars in millions)
Balance at beginning of period	$	55	67
Liabilities settled	(16)		(12)
Balance at end of period	$	39	55

As of December 31, 2024 and 2023, $21 million and $16 million were included in current maturities of long-term debt and $18 million and $39 million were included in long-term debt.

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,
	2024(1)		2023	2022
	(Dollars in millions)
Interest expense:
Gross interest expense	$	855	480	390
Capitalized interest	(36)		(22)	(16)
Total interest expense	$	819	458	374

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(1) The increase in interest expense for the year ended December 31, 2024 was primarily driven by an increase in average outstanding long-term debt of approximately $780 million.

Covenants

The New Level 3 Agreement and Level 3 Financing's first and second lien secured notes contain various representations and 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, dispose of assets and merge or consolidate with any other person. Also, under certain circumstances in connection with a “change of control” of Level 3 Parent or Level 3 Financing, Level 3 Financing will be required to make an offer to repurchase each series of its outstanding senior notes at a price of 101% of the principal amount redeemed, plus accrued and unpaid interest.

The debt covenants applicable to Level 3 Financing and its subsidiaries could have a material adverse impact on their ability to operate or expand their respective businesses, to pursue strategic transactions, or to otherwise pursue their plans and strategies.

Certain of Lumen's and our debt instruments contain cross payment default or 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.

The ability of Level 3 Financing and its subsidiaries to comply with the covenants in its debt instruments could be adversely impacted by a wide variety of events, including unforeseen contingencies, many of which are beyond its control.

Compliance

As of December 31, 2024, we believe we were in compliance with the provisions and financial covenants contained in our debt agreements in all material respects.

Subsequent Events

As of February 15, 2025, Level 3 Financing redeemed approximately $70 million aggregate principal amount of its unsecured senior notes in exchange for cash.