Frontier Communications 2008 Annual Report Download - page 43

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Sensitivity analysis of interest rate exposure
At December 31, 2008, the fair value of our long-term debt was estimated to be approximately $3.7
billion, based on our overall weighted average borrowing rate of 7.54% and our overall weighted average
maturity of approximately 12 years. There has been no material change in the weighted average maturity
applicable to our obligations since December 31, 2007.
Equity Price Exposure
Our exposure to market risks for changes in security prices as of December 31, 2008 is limited to our
pension assets. We have no other security investments of any material amount.
During 2008, the diminished availability of credit and liquidity in the United States and throughout the
global financial system has resulted in substantial volatility in financial markets and the banking system. These
and other economic events have had an adverse impact on investment portfolios.
As a result of negative investment returns and ongoing benefit payments, the Company’s pension plan
assets have declined from $822.2 million at December 31, 2007 to $589.8 million at December 31, 2008, a
decrease of $232.4 million, or 28%. This decrease represents a decline in asset value of $162.9 million, or 20%,
and benefits paid of $69.5 million, or 8%. The decline in pension plan assets did not impact our results of
operations, liquidity or cash flows in 2008. However, we expect that our pension expense will increase in 2009
and that we may be required to make a cash contribution to our pension plan beginning in 2010.
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FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES