Frontier Communications 2006 Annual Report Download - page 27

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CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
The notional amounts of fixed-rate indebtedness hedged as of December 31, 2006 and December 31, 2005
were $550.0 million and $500.0 million, respectively. Such contracts require us to pay variable rates of interest
(estimated average pay rates of approximately 9.02% as of December 31, 2006 and approximately 8.60% as of
December 31, 2005) and receive fixed rates of interest (average receive rate of 8.26% as of December 31, 2006
and 8.46% as of December 31, 2005). All swaps are accounted for under SFAS No. 133 (as amended) as fair
value hedges. For the year ended December 31, 2006, the interest expense resulting from these interest rate
swaps totaled approximately $4.2 million. For the years ended December 31, 2005, and 2004 our interest expense
was reduced by $2.5 million and $9.4 million, respectively, as a result of our swaps.
Credit Facilities
As of December 31, 2006, we had an available line of credit with financial institutions in the aggregate
amount of $249.6 million. Outstanding standby letters of credit issued under the facility were $0.4 million.
Associated facility fees vary, depending on our debt leverage ratio, and are 0.375% per annum as of
December 31, 2006. The expiration date for the facility is October 29, 2009. During the term of the facility we
may borrow, repay and reborrow funds. The credit facility is available for general corporate purposes but may
not be used to fund dividend payments.
Covenants
The terms and conditions contained in our indentures and credit facilities agreements include the timely
payment of principal and interest when due, the maintenance of our corporate existence, keeping proper books
and records in accordance with GAAP, restrictions on the allowance of liens on our assets, and restrictions on
asset sales and transfers, mergers and other changes in corporate control. We currently have no restrictions on the
payment of dividends either by contract, rule or regulation.
Our $200.0 million term loan facility with the Rural Telephone Finance Cooperative (RTFC) contains a
maximum leverage ratio covenant. Under the leverage ratio covenant, we are required to maintain a ratio of
(i) total indebtedness minus cash and cash equivalents in excess of $50.0 million to (ii) consolidated adjusted
EBITDA (as defined in the agreement) over the last four quarters no greater than 4.00 to 1.
Our $250.0 million credit facility and our $150.0 million senior unsecured term loan contain a maximum
leverage ratio covenant. Under the leverage ratio covenant, we are required to maintain a ratio of (i) total
indebtedness minus cash and cash equivalents in excess of $50.0 million to (ii) consolidated adjusted EBITDA
(as defined in the agreements) over the last four quarters no greater than 4.50 to 1. Although both facilities are
unsecured, they will be equally and ratably secured by certain liens and equally and ratably guaranteed by certain
of our subsidiaries if we issue debt that is secured or guaranteed.
Certain indentures for our senior unsecured debt obligations limit our ability to create liens or merge or
consolidate with other companies and our subsidiaries’ ability to borrow funds, subject to important exceptions
and qualifications.
We are in compliance with all of our debt and credit facility covenants.
Proceeds from the Sale of Equity Securities
We receive proceeds from the issuance of our common stock pursuant to our stock-based compensation
plans. For the periods ended December 31, 2006 and 2005, we received approximately $27.2 million and $47.6
million, respectively, upon the exercise of outstanding stock options.
On August 17, 2004, we issued 32,074,000 shares of common stock, including 3,591,000 treasury shares, to
our equity unit holders in settlement of the equity purchase contract component of the equity units. With respect
to the $460.0 million senior note component of the equity units, we repurchased $300.0 million principal amount
of these notes in July 2004. The remaining $160.0 million of the senior notes were repriced and a portion was
remarketed on August 12, 2004 as our 6.75% notes due August 17, 2006.
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