Frontier Communications 2008 Annual Report Download - page 74

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 of 2.250% as of December 31,
2008 based on the prime rate or 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
these notes.
As of December 31, 2008, EPPICS representing a total principal amount of $197.8 million have been
converted into 15,969,645 shares of our common stock. There were no outstanding EPPICS as of December 31,
2008. As a result of the redemption of all outstanding EPPICS as of December 31, 2008, the $10.5 million in
debt with related parties was reclassified by the Company against an offsetting investment.
As of December 31, 2008, we had an available line of credit with seven financial institutions in the
aggregate amount of $250.0 million. Associated facility fees vary, depending on our debt leverage ratio, and
were 0.225% per annum as of December 31, 2008. The expiration date for this $250.0 million five year
revolving credit agreement is May 18, 2012. During the term of the credit facility we may borrow, repay and
reborrow funds, subject to customary borrowing conditions. The credit facility is available for general corporate
purposes but may not be used to fund dividend payments.
On January 15, 2008, we terminated all of our interest rate swap agreements representing $400.0 million
notional amount of indebtedness associated with our Senior Notes due in 2011 and 2013. Cash proceeds on the
swap terminations of approximately $15.5 million were received in January 2008. The related gain has been
deferred on the consolidated balance sheet, and is being amortized into interest expense over the term of the
associated debt.
During 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. As further described below, we temporarily borrowed and repaid $200.0 million during the month of
March 2007, utilized to temporarily fund our acquisition of Commonwealth.
In connection with the acquisition of Commonwealth, we assumed $35.0 million of debt under a revolving
credit facility and approximately $191.8 million face amount of Commonwealth convertible notes (fair value of
approximately $209.6 million). During March 2007, we paid down the $35.0 million credit facility, and through
December 31, 2007, we retired approximately $183.3 million face amount (for which we paid $165.4 million in
cash and $36.7 million in common stock) of the convertible notes (premium paid of $18.9 million was recorded
as $17.8 million to goodwill and $1.1 million to other income (loss), net). The remaining outstanding balance
of $8.5 million was fully redeemed in the fourth quarter of 2008.
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 borrowed 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.
During the first quarter of 2007, we incurred and expensed approximately $4.1 million of fees associated
with the bridge loan facility established to temporarily fund our acquisition of Commonwealth. In the second
quarter of 2007, we completed an exchange offer (to publicly register the debt) on 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 issued in a private placement on December 22, 2006, for registered Senior Notes due 2027. 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. The debt retirement generated a pre-tax loss on the early
extinguishment of debt at a premium of approximately $16.3 million in the second quarter of 2007 and is
included in other income (loss), net. As a result of this debt redemption, we also terminated three interest rate
swap agreements hedging an aggregate $150.0 million notional amount of indebtedness. Payments on the swap
terminations of approximately $1.0 million were made in the second quarter of 2007.
F-23
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements