Cincinnati Bell 2006 Annual Report Download - page 119

The servicing of the Company’s indebtedness requires a significant amount of cash, and its ability to generate
cash depends on many factors beyond its control.
The Company’s ability to generate cash is subject to general economic, financial, competitive, legislative,
regulatory, and other factors, many of which are beyond its control. The Company cannot provide assurance that
its business will generate sufficient cash flow from operations, that additional sources of debt financing will be
available or that future borrowings will be available under its credit facilities, in each case, in amounts sufficient
to enable the Company to service its indebtedness, or to fund other liquidity needs. If the Company cannot
service its indebtedness, it will have to take actions such as reducing or delaying capital expenditures, strategic
acquisitions, investments and joint ventures, selling assets, restructuring or refinancing indebtedness, or seeking
additional equity capital, which may adversely affect its customers and affect their willingness to remain
customers. The Company cannot provide assurance that any of these remedies could, if necessary, be reached on
commercially reasonable terms, or at all. In addition, the terms of existing or future debt instruments may restrict
the Company from adopting any of these alternatives.
The Company depends on the receipt of dividends or other intercompany transfers from its subsidiaries.
Certain of the Company’s material subsidiaries are subject to regulatory authority that may potentially limit
the ability of a subsidiary to distribute funds or assets to the Company. If the Company’s subsidiaries were to be
prohibited from paying dividends or making distributions to Cincinnati Bell Inc. (“the Parent Company”), the
Parent Company may not be able to make the scheduled interest and principal repayments on its $1.8 billion of
debt. This would have a material adverse effect on the Company’s liquidity and the trading price of the
Cincinnati Bell common stock, preferred stock, and debt instruments.
The Company’s creditors and preferred stockholders have claims that are superior to claims of the holders
of Cincinnati Bell common stock. Accordingly, in the event of the Company’s dissolution, bankruptcy,
liquidation, or reorganization, payment is first made on the claims of creditors of the Company and its
subsidiaries, then preferred stockholders and, finally, if amounts are available, to holders of Cincinnati Bell
common stock.
The Company depends on its credit facilities to provide for its financing requirements in excess of amounts
generated by operations.
The Company depends on its credit facilities to provide for temporary financing requirements in excess of
amounts generated by operations. As of December 31, 2006, the Company had no outstanding borrowings under
its revolving credit facility and had outstanding letters of credit totaling $4.8 million, leaving $245.2 million in
additional borrowing availability under its $250 million revolving credit facility. The ability to borrow from the
credit facilities is predicated on the Company’s and its subsidiaries’ compliance with covenants. Failure to satisfy
these covenants would constrain or prohibit its ability to borrow under the credit facilities. As of December 31,
2006, the Company was in compliance with all of the covenants of its credit facilities.
The credit facilities and other indebtedness impose significant restrictions on the Company.
The Company’s debt instruments impose, and the terms of any future debt may impose, operating and other
restrictions on the Company. These restrictions affect, and in many respects limit or prohibit, among other things,
the Company’s and its subsidiaries’ ability to:
•incur additional indebtedness;
•create liens;
•make investments;
•enter into transactions with affiliates;
•sell assets;
•guarantee indebtedness;
•declare or pay dividends or other distributions to shareholders;
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