FairPoint Communications 2004 Annual Report Download - page 106

(iv) repurchase $7.0 million aggregate principal amount of the 2000 Notes (together with accrued and unpaid interest thereon)
for approximately $6.1 million; (v) make a capital contribution of approximately $1.5 million to Carrier Services, which used
these proceeds to retire $2.2 million of its debt; and (vi) pay transaction fees.
As a result of the issuance of the 2003 Notes, the Company recorded $2.8 million and $0.7 million of nonoperating gains
on the extinguishment of the 1998 Fixed Rate Notes and 2000 Notes and the Carrier Services debt, respectively. The
Company also repurchased some series A preferred stock at a discount of $2.9 million. Additionally, the Company recorded a
nonoperating loss of $5.0 million for the write-off of debt issue costs related to this extinguishment of debt in 2003.
(e) Carrier Services' Senior Secured Notes
On May 10, 2002, Carrier Services entered into an amended and restated credit agreement with its lenders to restructure
the obligations of Carrier Services and its subsidiaries under Carrier Services' Credit Facility. In connection with such
restructuring, (i) Carrier Services paid certain of its lenders $5.0 million to satisfy $7.0 million of the obligations under Carrier
Services' credit facility, (ii) the lenders converted $93.9 million of the loans and obligations under Carrier Services' credit facility
into shares of the Company's series A preferred stock having a liquidation preference equal to the amount of the loans and
obligations under Carrier Services' credit facility, and (iii) the remaining loans under Carrier Services' credit facility and Carrier
Services' obligations under its swap arrangements were converted into $27.9 million aggregate principal amount of new term
loans.
As a result of this restructuring, in 2002, the Company recorded a gain classified within discontinued operations of
$17.5 million for the extinguishment of debt and settlement of its interest rate swap agreements. The gain represents the
difference between the May 10, 2002 carrying value of $128.8 million of retired debt ($125.8 million) and related swap
obligations ($3.0 million) and the sum of the aggregate value of the cash paid ($5.0 million) plus principal amount of new term
loans ($27.9 million) plus the estimated fair value of the Company's series A preferred stock issued ($78.4 million).
The converted loans under the new Carrier Services' amended and restated credit agreement consisted of two term loan
facilities: (i) tranche A loans in the aggregate principal amount of $8.7 million and (ii) tranche B loans in the aggregate principal
amount of $19.2 million, each of which was to mature in May 2007. Interest on the new loans was payable monthly and
accrued at a rate of 8% per annum; provided, however, that upon an event of default the interest rate would increase to 10% per
annum. Interest on the tranche A loans must be paid in cash and interest on tranche B loans may be paid, at the option of
Carrier Services, either in cash or in kind. For the years ended December 31, 2004 and 2003, $0.1 million and $1.5 million,
respectively, in additional debt was issued to satisfy the accrued in kind interest on the tranche B loans. The principal of the
tranche A loans was due at maturity and the principal of the tranche B loans was payable as follows: (a) $3.0 million was due
on September 30, 2005; (b) $5.4 million was due on September 30, 2006; and (c) the remaining principal balance was due at
maturity. On May 6, 2003, Carrier Services extinguished $2.2 million of the tranche A and tranche B loans. Carrier Services
has made mandatory prepayments on the tranche B loans utilizing payments received under its tax-sharing agreement with
FairPoint and proceeds from asset sales. On January 30, 2004,
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