Fairfax Holdings (FFH, Financial) buys 55,590,000 shares of 15% convertible senior notes from Level 3 Communications (LVLT, Financial) for a little over $100 million, as revealed by the SEC filing today.
The Notes will mature in 2013 and pay 15% annual cash interest. The Notes are convertible at an initial conversion price of $1.80 per share, subject to adjustment upon certain events, at any time before the close of business on January 15, 2013. These notes are held at different subsidiaries of Fairfax. $45 million aggregate principal amount of Notes is held by Odyssey America Reinsurance Corporation, $30 million aggregate principal amount of Notes is held by North River Insurance Company, $20.062 million aggregate principal amount of Notes is held by Fairfax (Barbados) International Corp. and $5 million aggregate principal amount of Notes is held by Falcon Insurance Company (Hong Kong) Limited. Today Level 3 closed at $0.63 a share.
Level 3 will use approximately $227.3 million of the net proceeds from the offering of the Notes to retire some of its existing notes which pays a much lower interest rates, including all of its outstanding 2.875% Convertible Senior Notes due 2010, 6% Convertible Subordinated Notes due 2010.
It is interesting to point out that Level 3 is heavily by Mason Hawkins’s Funds, which own more than 28% of all Level 3 shares. Coincidently, Mason Hawkins is also a large shareholder of Fairfax Holdings.
It is surprising the see that Level 3 is willing to pay 15% of interest on borrowing. On the other hand, Prem Watsa of Fairfax is taking the advantage of the situation. This is one of the times when cash is the real king.
Level 3 seems to have some good connections with people of deep pockets. A few years ago during the telecom bubble, the company borrowed from Berkshire Hathaway (BRK-a) and Leucadia (LUK, Financial). Both of them later converted convertible notes into common shares and made good profit.
The Notes will mature in 2013 and pay 15% annual cash interest. The Notes are convertible at an initial conversion price of $1.80 per share, subject to adjustment upon certain events, at any time before the close of business on January 15, 2013. These notes are held at different subsidiaries of Fairfax. $45 million aggregate principal amount of Notes is held by Odyssey America Reinsurance Corporation, $30 million aggregate principal amount of Notes is held by North River Insurance Company, $20.062 million aggregate principal amount of Notes is held by Fairfax (Barbados) International Corp. and $5 million aggregate principal amount of Notes is held by Falcon Insurance Company (Hong Kong) Limited. Today Level 3 closed at $0.63 a share.
Level 3 will use approximately $227.3 million of the net proceeds from the offering of the Notes to retire some of its existing notes which pays a much lower interest rates, including all of its outstanding 2.875% Convertible Senior Notes due 2010, 6% Convertible Subordinated Notes due 2010.
It is interesting to point out that Level 3 is heavily by Mason Hawkins’s Funds, which own more than 28% of all Level 3 shares. Coincidently, Mason Hawkins is also a large shareholder of Fairfax Holdings.
It is surprising the see that Level 3 is willing to pay 15% of interest on borrowing. On the other hand, Prem Watsa of Fairfax is taking the advantage of the situation. This is one of the times when cash is the real king.
Level 3 seems to have some good connections with people of deep pockets. A few years ago during the telecom bubble, the company borrowed from Berkshire Hathaway (BRK-a) and Leucadia (LUK, Financial). Both of them later converted convertible notes into common shares and made good profit.
