Cincinnati Bell 2008 Annual Report Download - page 176

commencing on January 15, 2004. The 7
1
⁄ 4 % Senior Notes due 2013 are unsecured 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 and future subsidiaries that is a guarantor under the Corporate
credit facility is also a guarantor of the 7
1
⁄ 4 % Senior Notes due 2013 on an unsecured basis with certain
immaterial exceptions. The indenture governing the 7
1
⁄ 4 % Senior 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 %
Senior Notes due 2013 provides for customary events of default, including a cross-default provision for failure
for both non-payment at final maturity or acceleration due to a default of any other existing debt instrument that
exceeds $20 million. The Company may redeem the 7
1
⁄ 4 % Senior 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 $33.8 million in 2008, $35.3 million in 2007, and $36.2 million in 2006
related to these senior notes.
In 2008 and 2007, the Company purchased and extinguished $30.6 million and $26.4 million, respectively,
of 7
1
⁄ 4 % Senior Notes due 2013 and recognized a gain on extinguishment of debt of $5.3 million in 2008 and a
loss on extinguishment of debt of $0.4 million in 2007.
8
3
⁄ 8 % Senior Subordinated Notes due 2014
In November 2003, the Company issued $540 million of 8
3
⁄ 8 % Senior Subordinated Notes due 2014
(“8
3
⁄ 8 % Subordinated Notes”). The net proceeds, after deducting fees and expenses, totaled $528.2 million and
were used to purchase all of the Company’s then outstanding Convertible Subordinated Notes due 2009.
In February 2005, the Company issued an additional $100 million of 8
3
⁄ 8 % Subordinated Notes pursuant to
the existing indenture. Net proceeds from this issuance together with those of the 7% Senior Notes due 2015 and
amounts under the Corporate credit facility were used to repay and terminate the prior credit facility. All of the
8
3
⁄ 8 % Subordinated Notes constitute a single class of security with the same terms and are fixed rate bonds to
maturity.
Interest on the 8
3
⁄ 8 % Subordinated Notes is payable in cash semi-annually in arrears on January 15 and
July 15, commencing on July 15, 2004. The 8
3
⁄ 8 % Subordinated Notes are unsecured senior subordinated
obligations, ranking junior to all existing and future senior indebtedness of the Company. The 8
3
⁄ 8 %
Subordinated 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 % Subordinated 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 % Subordinated 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 % Subordinated Notes provides for customary events of default, including a cross-
default provision for both nonpayment at final maturity or acceleration due to a default of any other existing debt
instrument that exceeds $20 million. The Company may redeem the 8
3
⁄ 8 % Subordinated 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 interest expense of $49.6 million in 2008 and $53.6 million in both 2007
and 2006.
During 2008 and 2007, the Company purchased and extinguished $75.0 million and $5.0 million,
respectively, of 8
3
⁄ 8 % Subordinated Notes and recognized a gain on extinguishment of debt of $8.1 million and
$0.1 million, respectively.
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