Cincinnati Bell 2011 Annual Report Download - page 131

Form 10-K Part I Cincinnati Bell Inc.
•the Company’s debt instruments require maintenance of specified financial ratios and other restrictive
covenants. Failure to comply with these covenants, if not cured or waived, could limit availability to the
cash required to fund operations and general obligations and could result in the Company’s dissolution,
bankruptcy, liquidation, or reorganization.
The Company’s creditors and preferred stockholders have claims that are superior to claims of the holders
of the Company’s 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 the Company’s
common stock.
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 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;
•repurchase equity interests;
•redeem debt that is junior in right of payment to such indebtedness;
•enter into agreements that restrict dividends or other payments from subsidiaries;
•issue or sell capital stock of certain of its subsidiaries; and
•consolidate, merge, or transfer all or substantially all of its assets and the assets of its subsidiaries on a
consolidated basis.
In addition, the Company’s credit facilities and debt instruments include restrictive covenants that may
materially limit the Company’s ability to prepay debt and preferred stock. The agreements governing the credit
facilities also require the Company to achieve and maintain compliance with specified financial ratios.
The restrictions contained in the terms of the credit facilities and its other debt instruments could:
•limit the Company’s ability to plan for or react to market conditions or meet capital needs or otherwise
restrict the Company’s activities or business plans; and
•adversely affect the Company’s ability to finance its operations, strategic acquisitions, investments or
alliances, or other capital needs, or to engage in other business activities that would be in its interest.
A breach of any of these restrictive covenants or the Company’s inability to comply with the required
financial ratios would result in a default under some or all of the debt agreements. During the occurrence and
continuance of a default, lenders may elect to declare all outstanding borrowings, together with accrued interest
and other fees, to be immediately due and payable. Additionally, under the credit facilities, the lenders may elect
not to provide loans until such default is cured or waived. The Company’s debt instruments also contain cross-
acceleration provisions, which generally cause each instrument to be subject to early repayment of outstanding
principal and related interest upon a qualifying acceleration of any other debt instrument. Failure to comply with
13
Form 10-K