Earthlink 2014 Annual Report Download - page 84

Table of Contents EARTHLINK HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Ranking and Guaranty.
The Senior Notes and the related guarantees of the Guarantors are the Company’s and the Guarantors’
unsecured senior
obligations and rank equally with all of the Company’s and the Guarantors’ other senior indebtedness.
Covenants.
The indenture governing the Senior Notes includes covenants which, subject to certain exceptions, limit the ability of the Company
and its Restricted Subsidiaries (as defined in the indenture) to, among other things, incur additional indebtedness, make certain types of restricted
payments, incur liens on assets of the Company or the Restricted Subsidiaries, engage in asset sales and enter into transactions with affiliates.
Upon a change of control (as defined in the indenture), the Company may be required to make an offer to repurchase the Notes at 101%
of their
principal amount, plus accrued and unpaid interest. The indenture governing the Senior Notes also contains customary events of default. As of
December 31, 2014 , the Company was in compliance with these covenants.
The indenture governing the Senior Notes contains covenants regarding the Company's ability to make Restricted Payments (as defined in the
indenture), including certain dividends, stock purchases, debt repayments and investments. As of December 31, 2014
, the indenture governing
the Company's Senior Notes permitted approximately $206.8 million
in Restricted Payments. The Company's ability to make Restricted
Payments varies over time, and is determined, in part, by the extent that the Company's cumulative EBITDA exceeds 300%
of its cumulative
interest expense.
ITC^DeltaCom Senior Secured Notes due April 2016
General . In connection with the EarthLink’s acquisition of ITC^DeltaCom in December 2010, EarthLink assumed ITC^DeltaCom’
s outstanding
$325.0 million aggregate principal amount of 10.5% senior secured notes due on April 1, 2016 (the “ITC^DeltaCom Notes”).
The
ITC^DeltaCom Notes were recorded at acquisition date fair value, which was based on publicly-
quoted market prices. The ITC^DeltaCom Notes
accrued interest at a rate of 10.5% per year. Interest on the ITC^DeltaCom Notes was payable semi-
annually in cash in arrears on April 1 and
October 1 of each year. The maturity date of the ITC^DeltaCom Notes was April 1, 2016.
Repurchases and Redemptions.
Under the indenture for the ITC^DeltaCom Notes, following the consummation of EarthLink's acquisition,
ITC^DeltaCom was required to offer to repurchase any or all of the ITC^DeltaCom Notes at 101%
of their principal amount. As a result,
approximately $0.2 million outstanding principal amount of the ITC^DeltaCom Notes was repurchased in January 2011.
In December 2012, the Company exercised its right to call for the redemption of 10%
of the aggregate principal amount of its outstanding
ITC^DeltaCom Notes. The Company redeemed $32.5 million
aggregate principal amount of the ITC^DeltaCom Notes on December 6, 2012.
The redemption price was equal to 103%
of the principal amount thereof, plus accrued and unpaid interest. Upon completion of the redemption,
$292.3 million aggregate principal amount of the ITC^DeltaCom Notes remained outstanding. The Company recognized an $0.8 million
gain on
redemption.
In May 2013, the Company commenced a cash tender offer (the “Tender Offer”) for any and all of the $292.3 million
outstanding principal
amount of the ITC^DeltaCom Notes. Approximately $129.6 million aggregate principal amount (or 44.36%
) of the ITC^DeltaCom Notes were
validly tendered in May 2013 at a price equal to 105.875%
of the principal amount thereof, plus accrued and unpaid interest. In June 2013, the
Company redeemed the remaining $162.7 million
aggregate principal amount of the ITC^DeltaCom Notes at a redemption price equal to
105.250%
of the principal amount thereof, plus accrued and unpaid interest. As a result, all of the remaining obligations under the indenture for
the ITC^DeltaCom Notes have been terminated and no principal amount remains outstanding. The Company paid an aggregate of
$314.8 million
in the Tender Offer and redemption, which consisted of $292.3 million of outstanding principal amount, $16.2 million of premiums and
$6.3
million of accrued and unpaid interest. The Company recognized a $2.0 million
net loss on the Tender Offer and redemption, consisting of the
$16.2 million of premiums paid, net of $14.2 million for the write-
off of unamortized premium on debt. This loss is included in interest expense
and other, net, in the Consolidated Statement of Comprehensive Income (Loss). The payment of the premium in included in repayment of debt
and capital lease obligations in the Consolidated Statement of Cash Flows.
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