Cincinnati Bell 2010 Annual Report Download - page 169

no servicing asset or liability has been recorded. The Receivables Facility is subject to bank renewals in the
second quarter of each year, and in any event expires in March 2012. In the event the Receivables Facility is not
renewed, the Company believes it would be able to refinance any outstanding borrowings under the Corporate
revolving credit facility.
Although CBF is a wholly-owned consolidated subsidiary of the Company, CBF is legally separate from the
Company and each of the Company’s other subsidiaries. Upon and after the sale or contribution of the accounts
receivable to CBF, such accounts receivable are legally assets of CBF, and as such are not available to creditors
of other subsidiaries or the parent company.
For the purposes of consolidated financial reporting, the Receivables Facility is accounted for as a secured
financing. Because CBF has the ability to prepay the Receivables Facility at any time by making a cash payment
and effectively repurchasing the receivables transferred pursuant to the facility, the transfers do not qualify for
“sale” treatment on a consolidated basis under ASC 860, “Transfers and Servicing.” At December 31, 2010, the
Company had no outstanding borrowings under the Receivables Facility and had $100 million in borrowing
availability. Based on the eligible receivables at December 31, 2009, the Company had borrowed $85.9 million,
which was the maximum borrowing permitted at that date. Interest on the Receivables Facility is based on the
commercial paper rate plus 1.35% and was $0.9 million in 2010, $1.7 million in 2009, and $3.0 million in 2008.
The average interest rate on the Receivables Facility was 1.6% in 2010, 1.8% in 2009, and 3.9% in 2008.
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 and future senior subordinated
indebtedness 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 for nonpayment at final maturity and for
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 102.333%, 101.167%, and
100.000% on or after February 15, 2011, 2012, and 2013, respectively. The Company incurred interest expense
related to these notes of $17.3 million in both 2010 and 2009 and $17.5 million in 2008.
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.
81/4% Senior Notes due 2017
In October 2009, the Company issued $500 million of 81/4% Senior Notes due 2017 (“81/4% Senior Notes”).
Net proceeds of $492.8 million, after debt discount, were used to redeem the outstanding 71/4% Senior Notes due
2013 of $439.9 million plus accrued and unpaid interest, related call premium, and for general corporate
purposes, including the repayment of other debt. The 81/4% Senior Notes are fixed rate bonds to maturity.
Interest on the 81/4% Senior Notes is payable semi-annually in cash in arrears on April 15 and October 15 of
each year, commencing April 15, 2010. The 81/4% Senior Notes are unsecured senior obligations ranking equally
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Form 10-K