Level 3 Adopts Shareholder Rights Plan

Level 3 adopts rights plan designed to protect NOLs

April 11, 2011

2 Min Read

BROOMFIELD, Colo. -- Level 3 Communications, Inc. (NASDAQ:LVLT - News) announced today that it has adopted a Stockholder Rights Plan (Rights Plan). The Rights Plan is designed to protect the company's federal Net Operating Losses (NOLs) from the effect of Internal Revenue Code (IRC) Section 382, which can restrict the use of NOLs.

As of Dec. 31, 2010, the company had a NOL carry forward for federal tax purposes of approximately $5.9 billion. The company's ability to use its NOLs can be negatively affected if there is an 'ownership change' as defined under IRC Section 382. In general, this would occur if certain ownership changes related to the company's stock that is held by five percent or greater stockholders exceed 50 percent, measured over a rolling three-year period. The completion of the company's pending business combination transaction with Global Crossing Limited (Global Crossing) announced today would move the company significantly closer to the 50 percent ownership change and increase the likelihood of a loss of the company's valuable NOLs. The purpose of the Rights Plan is to deter trading that would result in an ownership change and to protect the company's ability to use its NOLs in the future, in order to prevent the reduction in stockholder value that would result from the loss of the NOLs. The Rights Plan was not adopted as an anti-takeover measure, and if the Global Crossing transaction is not completed, the Rights Plan would expire.

The Rights Plan will be limited in life, and the rights will expire upon the earliest of (1) the day following the third anniversary of the closing of the Global Crossing transaction, if stockholder approval of the Rights Plan is obtained; (2) the first anniversary of the closing of the Global Crossing transaction, if stockholder approval of the Rights Plan is not obtained by that date; (3) the termination of the Amalgamation Agreement governing the Global Crossing transaction; (4) the determination by the company's Board of Directors that the NOLs are utilized in all material respects or that an ownership change under IRC Section 382 would not adversely effect in any material respect the time period in which the company could use the NOLs, or materially impair the amount of the NOLs that could be used by the company in any particular time period; or (5) certain other events described in the Rights Plan, including if the company's Board of Directors determines that expiration is in the company's best interest.

Level 3 Communications Inc. (NYSE: LVLT)

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