Tough times for Level 3

(Fortune) -- Shares of Level 3, the Broomfield, Colo., telco wholesaler, fell 13% Monday after co-founder and president Kevin O'Hara resigned. The move raises concerns about the health of the company's business amid a weak wholesale market.

Level 3 (LVLT, Fortune 500) has struggled for a decade to finance its expensive broadband network operations. The company ran its operating loss to $1.11 billion last year, compared to a $790 million operating loss in 2006. These mounting losses continue at a time when the debt markets have gotten much tighter. The company refinanced $2.5 billion in debt last year and carries a total of $6.9 billion in debt. That's a heavy load considering the company has only $723 million in cash on its books.

Investors fear the company will cut its 2008 sales outlook and move its target for positive cash flow in its communications business out past the 2009 timeframe it has promised.

This would be the second round of the boom-bust cycle for Level 3. The company emerged on the public market ten years ago during the Internet boom. Level 3 managed to survive the collapse of the industry after the dot-com crash. One of its desperation moves involved the acquisition of two software distribution companies to help avoid the violation of minimum revenue covenants on its loans.

But the continually unstable wholesale market and the constant need for new financing have spooked investors. Level 3 shares have fallen 38% so far this year.