Frontier Communications 2008 Annual Report Download - page 27

Cash Flow used by and provided from Financing Activities
Debt Reduction and Debt Exchanges
In 2008, we retired an aggregate principal amount of $144.7 million of debt, consisting of $128.7 million
principal amount of our 9.25% Senior Notes due 2011, $12.0 million of other senior unsecured debt and rural
utilities service loan contracts, and $4.0 million of 5% Company Obligated Mandatorily Redeemable
Convertible Preferred Securities (EPPICS).
In 2007, we retired an aggregate principal amount of $967.2 million of debt, including $3.3 million of
EPPICS, and $17.8 million of 3.25% Commonwealth convertible notes that were converted into our common
stock. On April 26, 2007, we redeemed $495.2 million principal amount of our 7.625% Senior Notes due 2008
at a price of 103.041% plus accrued and unpaid interest. During the first quarter of 2007, we borrowed and
repaid $200.0 million utilized to temporarily fund the acquisition of Commonwealth, and we paid down the
$35.0 million Commonwealth credit facility. Through December 31, 2007, we retired $183.3 million face
amount of Commonwealth convertible notes for which we paid $165.4 million in cash and $36.7 million in
common stock. We also paid down $44.6 million of industrial development revenue bonds and $4.3 million of
rural utilities service loan contracts.
In 2006, we retired an aggregate principal amount of $251.0 million of debt, including $15.9 million of
EPPICS that were converted into our common stock. During the first quarter of 2006, we entered into two debt-
for-debt exchanges of our debt securities. As a result, $47.5 million of our 7.625% notes due 2008 were
exchanged for approximately $47.4 million of our 9.00% notes due 2031. During the fourth quarter of 2006, we
entered into four debt-for-debt exchanges and exchanged $157.3 million of our 7.625% notes due 2008 for
$149.9 million of our 9.00% notes due 2031. The 9.00% notes are callable on the same general terms and
conditions as the 7.625% notes exchanged. No cash was exchanged in these transactions. However, with respect
to the first quarter debt exchanges, a non-cash pre-tax loss of approximately $2.4 million was recognized in
accordance with EITF No. 96-19, “Debtor’s Accounting for a Modification or Exchange of Debt Instruments,”
which is included in other income (loss), net.
On June 1, 2006, we retired at par our entire $175.0 million principal amount of 7.60% Debentures due
June 1, 2006. On June 14, 2006, we repurchased $22.7 million of our 6.75% Senior Notes due August 17, 2006
at a price of 100.181% of par. On August 17, 2006, we retired at par the $29.1 million remaining balance of the
6.75% Senior Notes.
We may from time to time repurchase our debt in the open market, through tender offers, exchanges of
debt securities, by exercising rights to call or in privately negotiated transactions. We may also refinance
existing debt or exchange existing debt for newly issued debt obligations.
Issuance of Debt Securities
On March 28, 2008, we borrowed $135.0 million under a senior unsecured term loan facility that was
established on March 10, 2008. The loan matures in 2013 and bears interest based on the prime rate or London
Interbank Offered Rate (LIBOR), at our election, plus a margin which varies depending on our debt leverage
ratio. We used the proceeds to repurchase, during the first quarter of 2008, $128.7 million principal amount of
our 9.25% Senior Notes due 2011 and to pay for the $6.3 million of premium on early retirement of those
notes.
On March 23, 2007, we issued in a private placement an aggregate $300.0 million principal amount of
6.625% Senior Notes due 2015 and $450.0 million principal amount of 7.125% Senior Notes due 2019.
Proceeds from the sale were used to pay down $200.0 million principal amount of indebtedness incurred on
March 8, 2007 under a bridge loan facility in connection with the acquisition of Commonwealth and redeem,
on April 26, 2007, $495.2 million principal amount of our 7.625% Senior Notes due 2008. In the second
quarter of 2007, we completed an exchange offer (to publicly register the debt) for the $750.0 million in total
of private placement notes described above, in addition to the $400.0 million principal amount of 7.875%
Senior Notes due 2027 issued in a private placement on December 22, 2006, for registered notes.
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FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES