Level 3 Gets $500 Million Investment From Warren Buffett, Other Investors

Shares of Level 3 climbed 48.4 percent, or $1.40 a share, to $4.29 in afternoon trading Monday on the Nasdaq.

Level 3 has built a 20,000-mile fiber optic network around the world, serving customers such as the regional Bell carriers, Internet service providers and cable TV companies.

Legg Mason and Buffett's Berkshire Hathaway each agreed to buy $100 million and Longleaf Partners Funds agreed to buy $300 million in notes that will mature in 10 years and pay 9 percent cash interest. The notes can be converted into stock at a price of $3.41 per share.

Buffett had largely shunned Internet stocks while others rode the dot-com boom, building a portfolio on insurance and companies like Coca-Cola and owning shoe companies, furniture stores and the International Dairy Queen restaurant chain.

The new investment signaled a bet that Level 3 would survive an expected round of consolidation among telecom players.

"Liquid resources and strong financial backing are scarce and valuable assets in today's telecommunications world. Level 3 has both," Buffett said in a statement.

A spin-off of Omaha-based construction giant Peter Kiewit Sons', Level 3 was founded in 1998 and later moved its headquarters to Broomfield, a suburb of Denver.

Kiewit chairman emeritus, Walter Scott Jr., is chairman of Level 3 and is one of seven people on Berkshire's board. Buffett is chairman of Berkshire Hathaway and other board members include his wife, Susan, and son Howard.

Level 3 CEO James Crowe says unprecedented turmoil in the industry would create opportunities for his company as assets and customers become available.

"Spending on communications services is nondiscretionary," says Bill Miller, CEO of Legg Mason Funds Management. "We believe more strongly than ever that Level 3 is emerging as one of the ultimate leaders, survivors and consolidators in the industry.'

Several telecom companies have suffered while waiting for demand to catch up to a glut of fiber-optic capacity they built while accumulating millions of dollars of debt.

Level 3 listed $6 billion in long-term debt in its last quarterly report.

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