AT&T Wireless 2012 Annual Report Download - page 75

AT&T Inc. | 73
• We fail to pay when due other debt of $400 or more that
results in acceleration of that debt (commonly referred
to as cross-acceleration) or a creditor commences
enforcement proceedings within a specified period after
a money judgment of $400 or more has become final.
• A person acquires beneficial ownership of more than
50% of AT&T common shares or more than a majority
of AT&T’s directors change in any 24-month period other
than as elected by the remaining directors (commonly
referred to as a change in control).
• Material breaches of representations or warranties in the
agreement.
• We fail to comply with the negative pledge or
debt-to-EBITDA ratio covenants under the agreement.
• We fail to comply with other covenants under the
agreement for a specified period after notice.
• We fail to make certain minimum funding payments
under the Employee Retirement Income Security Act of
1974, as amended (ERISA).
• Our bankruptcy or insolvency.
Both the Five-Year Agreement and the Four-Year Agreement
contain provisions permitting subsidiaries to be added as
additional borrowers, with or without a guarantee by AT&T Inc.
The terms of the guarantee are set forth in the agreements.
Four-Year Agreement
The obligations of the lenders under the Four-Year Agreement
to provide advances will terminate on December 11, 2016,
unless prior to that date either: (i) AT&T and, if applicable,
a Co-Borrower, reduces to $0 the commitments of the
lenders under the Agreement or (ii) certain events of default
occur. The Agreement also provides that AT&T and lenders
representing more than 50% of the facility amount may
agree to extend their commitments under the Four-Year
Agreement for two additional one-year periods beyond
the December 11, 2016 termination date, under certain
circumstances. We also can request the lenders to further
increase their commitments (i.e., raise the available credit)
up to an additional $2,000 provided no event of default
has occurred.
Five-Year Agreement
The obligations of the lenders under the Five-Year Agreement
to provide advances will terminate on December 11, 2017,
unless prior to that date either: (i) AT&T, and if applicable, a
Co-Borrower, reduce to $0 the commitments of the lenders,
or (ii) certain events of default occur. We and lenders
representing more than 50% of the facility amount may agree
to extend their commitments for two one-year periods
beyond the December 11, 2017, termination date, under
certain circumstances. We also can request the lenders to
further increase their commitments (i.e., raise the available
credit) up to an additional $2,000 provided no event of
default has occurred.
we cannot reinstate any such terminated commitments.
At December 31, 2012, we had no advances outstanding
under either agreement and were in compliance with all
covenants under each agreement.
Advances under both agreements would bear interest, at
AT&T’s option, either:
• at a variable annual rate equal to (1) the highest of:
(a) the base (or prime) rate of the bank affiliate of
Citibank, N.A. which is serving as administrative agent
under the Agreement, (b) 0.50% per annum above the
Federal funds rate, and (c) the London Interbank Offered
Rate (LIBOR) applicable to U.S. dollars for a period of
one month plus 1.00% per annum, plus (2) an applicable
margin, as set forth in the Agreement (Applicable
Margin); or
• at a rate equal to: (i) the LIBOR for a period of one,
two, three or six months, as applicable, plus (ii) the
Applicable Margin.
The Applicable Margin for both agreements will equal 0.565%
per annum if our unsecured long-term debt is rated at least
A+ by Standard & Poor’s (S&P) or Fitch, Inc. (Fitch) or A1 by
Moody’s Investors Service (Moody’s). The Applicable Margin
will be 0.680% per annum if our unsecured long-term debt
ratings are A or A2 and will be 0.910% per annum in the
event our unsecured long-term debt ratings are A- and A3
(or below). In the event that AT&T’s unsecured long-term
debt ratings are split by S&P, Moody’s and Fitch, then the
Applicable Margin will be determined by the highest of the
three ratings, except that in the event the lowest of such
ratings is more than one level below the highest of the
ratings then the Applicable Margin will be determined based
on the level that is one level above the lowest of such ratings.
Under each agreement AT&T will pay a facility fee of 0.060%,
0.070% or 0.090% per annum, depending on AT&T’s credit
rating, of the amount of lender commitments.
Both agreements contain a negative pledge covenant, which
requires that, if at any time AT&T or a subsidiary pledges
assets or otherwise permits a lien on its properties, advances
under the agreement will be ratably secured, subject to
specified exceptions. Both agreements also contain a financial
ratio covenant that provides that AT&T will maintain, as of
the last day of each fiscal quarter, a debt-to-EBITDA (earnings
before interest, income taxes, depreciation and amortization,
and other modifications described in the agreements) ratio
of not more than 3.0 to 1, for the four quarters then ended.
Defaults under both agreements, which would permit the
lenders to accelerate required repayment and which would
increase the Applicable Margin by 2.00% per annum, include:
• We fail to pay principal or interest, or other amounts
under the agreement beyond any grace period.