Cincinnati Bell 2010 Annual Report Download - page 173

Debt Compliance
The Corporate credit facility has financial covenants that require the Company maintain certain leverage,
interest coverage, and fixed charge ratios. The Corporate credit facility also contains certain covenants which,
among other things, restrict the Company’s ability to incur additional debt or liens, pay dividends, repurchase
Company common stock, sell, transfer, lease, or dispose of assets and make investments or merge with another
company. If the Company were to violate any of its covenants and were unable to obtain a waiver, it would be
considered a default. If the Company were in default under the Corporate credit facility, no additional borrowings
under this facility would be available until the default was waived or cured. The Corporate credit facility
provides for customary events of default, including for failure to make any payment when due and for a default
on any other existing debt instrument having an aggregate principal amount that exceeds $35 million. The
Company is in compliance with its Corporate credit facility covenants.
Various issuances of the Company’s public debt, which include the 7% Senior Notes due 2015, 81/4% Senior
Notes due 2017, 83/4% Senior Subordinated Notes due 2018, and 83/8% Senior Notes due 2020, are governed by
indentures which contain covenants that, among other things, limit the Company’s ability to incur additional debt
or liens, pay dividends or make other restricted payments, sell, transfer, lease, or dispose of assets and make
investments or merge with another company. Restricted payments include common stock dividends, repurchase
of common stock, and certain public debt repayments. The Company is in compliance with its public debt
indentures as of December 31, 2010.
Extinguished Notes
71/4% Senior Notes due 2013
In July 2003, the Company issued $500 million of 71/4% Senior Notes due 2013. Net proceeds were used to
prepay term credit facilities and permanently reduce commitments under the Company’s then existing revolving
credit facility.
In 2009, the net proceeds from the issuance of 81/4% Senior Notes due 2017 discussed above were used to
redeem the outstanding 71/4% Senior Notes due 2013 of $439.9 million plus accrued and unpaid interest and
related call premium. As a result, the Company incurred a loss on debt extinguishment of $17.7 million, which
consisted of the call premium and write-off of debt issuance costs. Also, in 2008 the Company purchased and
extinguished $30.6 million of these senior notes and recognized a gain on extinguishment of debt of $5.3 million.
The Company recorded interest expense of $26.9 million in 2009 and $33.8 million in 2008 related to these
senior notes.
83/8% Senior Subordinated Notes due 2014
In November 2003, the Company issued $540.0 million of 83/8% Senior Subordinated Notes due 2014
(“83/8% Subordinated Notes”). The net proceeds were used to purchase outstanding corporate bonds.
In February 2005, the Company issued an additional $100.0 million of 83/8% Senior 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 83/8% Subordinated Notes constitute a single class of security with the same terms and are
fixed rate bonds to maturity.
During 2008, the Company purchased and extinguished $75.0 million of 83/8% Subordinated Notes and
recognized a gain on extinguishment of debt of $8.1 million.
In March 2010, net proceeds from the issuance of the 83/4% Senior Subordinated Notes due 2018 were used
to redeem the outstanding 83/8% Subordinated Notes in the amount of $560.0 million. As a result of the
redemption of the 83/8% Subordinated Notes in March 2010, the Company incurred a pre-tax loss on
extinguishment of debt of $10.3 million, which consists of the call premium and write-off of debt issuance costs
offset by the unamortized call premiums received on terminated interest rate swaps and the original issuance
premium.
The Company incurred interest expense related to these notes of $13.5 million, $46.9 million, and $49.6
million, in 2010, 2009, and 2008, respectively.
Tranche B Term Loan
In the fourth quarter of 2010, the Company issued $775 million of 83/8% Senior Notes due 2020, and
extinguished the entire $760 million Tranche B Term Loan.
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Form 10-K