FairPoint Communications 2007 Annual Report Download - page 61

Table of Contents
For the years ended December 31, 2007, 2006 and 2005, net cash provided by operating activities of continuing operations was
$35.8 million, $81.8 million and $61.7 million, respectively. The decrease in net cash provided by operating activities in 2007 was
primarily due to merger related costs incurred during 2007.
Our ability to service our indebtedness depends on our ability to generate cash in the future. We are not required to make any
scheduled principal payments under our existing credit facility’s term loan facility prior to maturity in February 2012. However, we will
need to refinance all or a portion of our indebtedness on or before maturity and may not be able to refinance our indebtedness on
commercially reasonable terms or at all. If we are unable to renew or refinance our existing credit facility, our failure to repay all amounts
due on the maturity date would cause a default under our existing credit facility.
Our existing credit facility consists of a revolving facility, referred to in this section as the revolver, in a total principal amount of up
to $100.0 million, of which $95.4 million was outstanding at February 22, 2008 (we had $52.2 million of cash on hand at February 22,
2008), and a term loan facility, referred to in this section as the term loan, in a total principal amount of $588.5 million with
$588.5 million outstanding at February 22, 2008. The term loan matures in February 2012 and the revolver matures in February 2011.
The revolver has a swingline sub-facility in an amount of $5.0 million and a letter of credit sub-facility in an amount of $10.0 million,
which will allow issuances of standby letters of credit for our account. Borrowings under the term loan and revolver bear interest, at our
option, for the revolving facility and for the term facility at either (a) the Eurodollar rate (as defined in our existing credit facility) plus an
applicable margin or (b) the Base rate (as defined in our existing credit facility) plus an applicable margin. The Eurodollar rate applicable
margin and the Base rate applicable margin for loans under our existing credit facility are 2.0% and 1.0%, respectively. Effective on
September 30, 2005, the Company amended its credit facility to reduce the effective interest rate margins on the $588.5 million term
facility by 0.25% to 1.75% on Eurodollar loans and to 0.75% for Base rate loans. Pursuant to the fifth amendment to our existing credit
facility, if our existing credit facility is not repaid in full prior to May 1, 2008, the margin on base rate loans will increase to 3.00% and
the margin on Eurodollar loans will increase to 4.00% with a Eurodollar rate floor of 2.50% and if our existing credit facility is not repaid
in full prior to January 1, 2009, the margin on base rate loans will increase to 5.00% and the margin on Eurodollar loans will increase to
6.00% with a Eurodollar rate floor of 3.25%
On January 25, 2007, we entered into an amendment to our existing credit facility that was intended to facilitate certain transactions
related to the merger. Among other things, such amendment: (i) permitted us to consummate the O-P Disposition and retain the proceeds
thereof up to an amount equal to $55.0 million; (ii) excluded the gain on the O-P Disposition from the calculation of “Available Cash”
under our existing credit facility; (iii) amended the definition of “Adjusted Consolidated EBITDA” to allow for certain one-time add-backs
to the calculation thereof for operating expenses incurred in connection with the Merger (subject to an overall cap on the amount of such
add-backs); (iv) amended the definition of “Consolidated Capital Expenditures” to exclude certain expenditures incurred by us in
connection with transition and integration costs prior to consummation of the merger (subject to an overall cap on the amount of such
exclusions); and (v) increased the leverage covenant and dividend suspension test to 5.50 to 1.00 and 5.25 to 1.00, respectively.
On February 25, 2008, we entered into the fifth amendment to our existing credit facility in order to accommodate the expected
March 31, 2008 closing date for the merger. The fifth amendment to our existing credit facility (i) allows us to continue to make pre-
closing expenditures related to the merger during the three months ending March 31, 2008; (ii) provides accommodations for certain
restructuring charges (including $17.8 million of cash restructuring charges) that we would incur if the merger is not consummated;
(iii) amends the interest coverage ratio maintenance covenant to require our interest coverage ratio to be not less than 1.85:1.00 for any
fiscal quarter ending after December 31, 2007 and on or prior to December 31, 2008, 2.50:1.00 for any fiscal quarter ending after
December 31, 2008 and on or prior to December 31, 2009 and 2.75:1:00 for any fiscal quarter ending thereafter; (iv) amends the leverage
ratio maintenance covenant to require our leverage ratio to not exceed 6.50:1.00 for any quarter ending after December 31, 2007 and on or
prior to December 31, 2008, 5:00:1:00 for any fiscal quarter ending after December 31, 2008 and on or prior to December 31, 2009 and
4.50:1.00 for any fiscal quarter ending thereafter; (v) prohibits us from paying dividends on or repurchasing our common stock if (1) our
total leverage ratio exceeds 4.50:1:00 (previously 5.25:1.00) on the dividend calculation date and/or (2) our cash on hand is less than
$20 million (previously $10.0 million); (vi) provides for an amount equal to 75% of the increase in our cumulative distributable cash
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