Cincinnati Bell 2008 Annual Report Download - page 177

7% Senior Notes due 2015
In February 2005, the Company sold $250 million of 7% Senior Notes due 2015 (“7% Senior Notes”). 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 the prior credit facility. The 7% Senior Notes are fixed
rate bonds to maturity.
Interest on the 7% Senior Notes is payable semi-annually in cash in arrears on February 15 and August 15 of
each year, commencing August 15, 2005. The 7% Senior Notes are unsecured senior obligations ranking equally
with all existing and future senior debt and ranking senior to all existing senior subordinated indebtedness,
including senior subordinated notes, and subordinated indebtedness. 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% Senior Notes on
an unsecured senior basis, with certain immaterial exceptions. The indenture governing the 7% Senior 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 7% Senior 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 7% Senior Notes for a redemption price of 103.500%, 102.333%, 101.167%,
and 100.000% after February 15, 2010, 2011, 2012, and 2013, respectively. At any time prior to February 15,
2010, the Company may redeem all or part of the 7% Senior Notes at a redemption price equal to the sum of
(1) 100% of the principal, plus (2) the greater of (a) 1% of the face value of the 7% Senior Notes to be redeemed,
or (b) the excess over the principal amount of the sum of the present values of (i) 103.5% of the face value of the
7% Senior Notes, and (ii) interest payments due from the date of redemption through February 15, 2010, in each
case discounted to the redemption date on a semi-annual basis at the applicable U.S. Treasury rates plus one-half
percent, plus (3) accrued and unpaid interest, if any, to the date of redemption. The Company incurred interest
expense related to these notes of $17.5 million in each of 2008, 2007, and 2006.
In 2008, the Company purchased and extinguished $2.5 million of 7% Senior Notes and recognized a gain
on extinguishment of debt of $0.7 million.
7
1
⁄ 4 % Senior Notes due 2023
In July 1993, the Company issued $50 million of 7
1
⁄ 4 % Senior Notes due 2023. The indenture related to
these 7
1
⁄ 4 % Senior Notes due 2023 does not subject the Company to restrictive financial covenants, but it does
contain a covenant providing that if the Company incurs certain liens on its property or assets, the Company must
secure the outstanding 7
1
⁄ 4 % Senior Notes due 2023 equally and ratably with the indebtedness or obligations
secured by such liens. The 7
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⁄ 4 % Senior Notes due 2023 are collateralized on a basis consistent with the
Corporate credit facility. Interest on the 7
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⁄ 4 % Senior Notes due 2023 is payable semi-annually on June 15 and
December 15. The Company may not redeem the 7
1
⁄ 4 % Senior Notes due 2023 prior to maturity. The indenture
governing the 7
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⁄ 4 % Senior Notes due 2023 provides for customary events of default, including a cross-default
provision for failure to make any payment when due or permitted acceleration due to a default of any other
existing debt instrument that exceeds $20 million. The Company recorded $3.6 million of interest expense
related to these notes in each of 2008, 2007, and 2006.
Accounts Receivable Securitization Facility
In March 2007, the Company and certain subsidiaries entered into an accounts receivable securitization
facility (“Receivables Facility”), which permits borrowings of up to $80 million, depending on the level of
eligible receivables and other factors. The Receivables Facility has a term of five years, expiring in March 2012.
Under the Receivables Facility, CBT, CBET, CBW, Cincinnati Bell Any Distance Inc., and Cincinnati Bell
Complete Protection Inc. sell their respective trade receivables on a continuous basis to CBF, a wholly-owned
limited liability company. In turn, CBF grants, without recourse, a senior undivided interest in the pooled
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Form 10-K