Earthlink 2015 Annual Report Download - page 82

Table of Contents
EARTHLINK HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Revolving Credit Facility
General. The Company has a credit agreement (the “Credit Agreement”) providing for a senior secured revolving credit facility with aggregate revolving
commitments of $135.0 million . The senior secured revolving credit facility terminates on May 29, 2017, and all amounts outstanding thereunder shall be due and
payable in full. The Company paid $1.9 million of transaction fees and expenses related to the amended senior secured revolving credit facility, which are being
amortized to interest expense over the life of the credit facility using the straight-line method. Commitment fees and borrowing costs under this facility vary and
are based the Company’s most recent Consolidated Leverage Ratio (as defined in the Credit Agreement). As of December 31, 2015 , the Company’s Commitment
Fee was 0.5% and the Company’s borrowing cost was LIBOR plus 3.25% for LIBOR Rate Loans and the Base Rate plus 2.25% for Base Rate Loans. The
Company had $35.0 million outstanding under the Credit Agreement at a weighted average interest rate of 3.68% as of December 31, 2015 . In addition, $1.8
million of letters of credit were outstanding under the facility’s Letter of Credit Sublimit as of December 31, 2015 .
The Company is the borrower under the Credit Agreement. All obligations of the borrower under the Credit Agreement are guaranteed by substantially all of the
Company's existing direct and indirect domestic subsidiaries and will be guaranteed by certain of the Company's future direct and indirect domestic subsidiaries.
The obligations of the Company and the subsidiary guarantors under the Credit Agreement, as well as obligations under certain treasury management, interest
protection or other hedging arrangements entered into with a lender, are secured by (subject to certain liens permitted by the Credit Agreement) liens, which rank
equally with the Company's other senior secured indebtedness, on or security interests in substantially all of the Company's and the subsidiary guarantors' present
and future assets (subject to certain exclusions set forth in the Credit Agreement).
Prepayment. The Company may prepay the senior secured revolving credit facility in whole or in part at any time without premium or penalty, subject to
reimbursement of the lenders’ breakage and redeployment costs in the case of prepayment of LIBOR borrowings. The Company may irrevocably reduce or
terminate the unutilized portion of the senior secured revolving credit facility at any time without penalty.
Covenants. The Credit Agreement contains representations and warranties, covenants, and events of default with respect to the Company and its subsidiaries that
are customarily applicable to senior secured credit facilities. The negative covenants in the Credit Agreement include restrictions on the ability of the Company and
its subsidiaries to, among other things, incur additional indebtedness, make capital expenditures, incur liens on assets, engage in certain mergers, acquisitions or
divestitures, pay dividends, repurchase stock or make other distributions, voluntarily prepay certain other indebtedness (including certain prepayments of the
Company’s existing notes), enter into transactions with affiliates, make investments, and change the nature of their businesses, and amend the terms of certain other
indebtedness (including the Company’s existing notes), in each case subject to certain exceptions set forth in the Credit Agreement.
The Credit Agreement requires the Company to maintain a consolidated net leverage ratio of not greater than 3.5 to 1.0 (with restrictions on cash netting) and a
consolidated interest coverage ratio of not less than 3.0 to 1.0 in order to borrow under the Credit Agreement. Additionally, the Credit Agreement requires the
Company to maintain a consolidated net leverage ratio of not greater than 3.25 to 1.0 in order to repurchase common stock and to make dividend payments in
excess of the $0.05 per share regular quarterly dividend. As of December 31, 2015 , the Company was in compliance with these covenants.
Financial Information Under Rule 3-10 of Regulation S-X
The Company’s Senior Notes and Senior Secured Notes (the "Notes") are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis
by each of the Company’s existing and future domestic subsidiaries, other than certain subsidiaries that are minor (the “Guarantor Subsidiaries”). All of the
Guarantor Subsidiaries are 100% owned by the Company and have, jointly and severally, fully and unconditionally guaranteed, to each holder of the Notes, the full
and prompt performance of the Company’s obligations under the Notes and the indenture governing the Notes, including the payment of principal (or premium, if
any) and interest on the Notes, on an equal and ratable basis. Further, the Company has no independent assets or operations, and there are no significant restrictions
on the ability of its consolidated subsidiaries to transfer funds to the Company in the form of cash dividends, loans or advances. The Company’s assets consist
solely of investments it has made in its consolidated subsidiaries, and its operations consist solely of changes in its investment in subsidiaries and interest
associated with the Notes. Based on these facts, and in accordance with SEC Regulation S-X Rule 3-10, “Financial statements of guarantors and issuers of
guaranteed securities registered or being registered,” the Company is not required to provide condensed consolidating financial information for the subsidiary
guarantors.
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