Cincinnati Bell 2005 Annual Report Download - page 124

senior obligations and rank equally with all of the Company’s existing and future senior debt and rank senior to
all existing and future subordinated debt. Each of the Company’s current subsidiaries that is a guarantor of the
Corporate credit facility is also a guarantor of the 7
1
⁄ 4 % Notes due 2013 on an unsecured senior basis, with
certain immaterial exceptions. The indenture governing the 7
1
⁄ 4 % Notes due 2013 contains covenants including
but not limited to the following: limitations on dividends to shareowners and other restricted payments; dividend
and other payment restrictions affecting the Company’s subsidiaries such that the subsidiaries are not permitted
to enter into an agreement that would limit their ability to make dividend payments to the parent; issuance of
indebtedness; asset dispositions; transactions with affiliates; liens; investments; issuances and sales of capital
stock of subsidiaries; and redemption of debt that is junior in right of payment. The indenture governing 7
1
⁄ 4 %
Notes due 2013 provides for an event of default upon the default and acceleration of any other existing debt
instrument which exceeds $20 million. The Company may redeem the 7
1
⁄ 4 % Notes due 2013 for a redemption
price of 103.625%, 102.417%, 101.208%, and 100.000% after July 15, 2008, 2009, 2010, and 2011, respectively.
The Company recorded interest expense of $36.2 million, $36.2 million and $17.1 million in 2005, 2004 and
2003, respectively, related to these senior notes.
Certain terms and conditions pertaining to these notes were altered as a result of a consent process
undertaken as part of the first stage of the Company’s 2005 refinancing plan. In January 2005, the indenture
governing the 7
1
⁄ 4 % Notes due 2013 (the “7
1
⁄ 4 % Indenture”) was amended to permit the Company to repurchase
or redeem the 16% Notes without regard to the extent of the Company’s ability to make restricted payments (as
defined in the 7
1
⁄ 4 % Indenture) under the 7
1
⁄ 4 % Indenture. In addition, the 7
1
⁄ 4 % Indenture was also amended to,
among other things, permit the classification of any potential call by the Company of Cingular Wireless
Corporation’s minority interest ownership as a “permitted acquisition” and would therefore not be considered a
restricted payment with regard to the 7
1
⁄ 4 % Indenture.
8
3
⁄ 8 % Senior Subordinated Notes due 2014
On November 19, 2003, the Company issued $540 million of 8
3
⁄ 8 % Senior Subordinated Notes due 2014 (the
“8
3
⁄ 8 % Notes”). The net proceeds, after deducting the initial purchasers’ discounts and fees and expenses related to
the 8
3
⁄ 8 % Notes, totaled $528.2 million. The Company used $524.6 million of the net proceeds to purchase all of
the Company’s then outstanding Convertible Subordinated Notes due 2009, which bore interest at a rate of 9%, at a
discounted price equal to 97% of their accreted value. The remaining proceeds were used to pay fees related to a
credit facility amendment and to reduce outstanding borrowings under the revolving credit facility.
On February 16, 2005, as part of the first stage of its 2005 refinancing plan, the Company issued an
additional $100 million of debt securities pursuant to the existing indenture. Net proceeds from this issuance
together with those of other concurrently issued bonds and amounts under the Corporate credit facility were used
to repay and terminate all of the prior credit facility and pay consent fees associated with an amendment to the
7
1
⁄ 4 % Indenture. All of the 8
3
⁄ 8 % Notes constitute a single class of security with the same terms and are fixed
rate bonds to maturity.
Interest on the 8
3
⁄ 8 % Notes is payable in cash semi-annually in arrears on January 15 and July 15,
commencing on July 15, 2004. The 8
3
⁄ 8 % Notes are unsecured senior subordinated obligations, ranking junior to
all existing and future senior indebtedness of the Company. The 8
3
⁄ 8 % Notes rank equally with all of the
Company’s existing and future senior subordinated debt and rank senior to all future subordinated debt. The
8
3
⁄ 8 % Notes are guaranteed on an unsecured senior subordinated basis by each of the Company’s current
subsidiaries that is a guarantor under the Corporate credit facility, with certain immaterial exceptions. The
indenture governing the 8
3
⁄ 8 % Notes contains covenants including but not limited to the following: limitations on
dividends to shareowners and other restricted payments; dividend and other payment restrictions affecting the
Company’s subsidiaries such that the subsidiaries are not permitted to enter into an agreement that would limit
their ability to make dividend payments to the parent; issuance of indebtedness; asset dispositions; transactions
with affiliates; liens; investments; issuances and sales of capital stock of subsidiaries; and redemption of debt that
is junior in right of payment. The indenture governing the 8
3
⁄ 8 % Notes provides for an event of default upon the
default and acceleration of any other existing debt instrument, which exceeds $20 million. The Company may
redeem the 8
3
⁄ 8 % Notes for a redemption price of 104.188%, 102.792%, 101.396%, and 100.000% after
January 15, 2009, 2010, 2011, and 2012, respectively. The Company incurred $52.5 million, $45.2 million and
$5.2 million of interest expense related to these notes in 2005, 2004 and 2003, respectively.
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