Frontier Communications 2009 Annual Report Download - page 83

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(10) Other Income (Loss), net:
The components of other income (loss), net for the years ended December 31, 2009, 2008 and 2007 are as
follows:
($ in thousands) 2009 2008 2007
Loss on retirement of debt, net.................................. $(45,939) $(6,290) $(18,217)
Bridge loan fee . . . ............................................. — — (4,069)
Litigation settlement proceeds/(costs) . ........................... 2,749 (1,037) —
Gain on expiration/settlement of customer advances, net . ......... 2,741 4,520 2,031
Other, net...................................................... (678) (2,363) 2,422
Total other income (loss), net ................................... $(41,127) $(5,170) $(17,833)
During the fourth quarter of 2009, we recognized a loss of $53.7 million on the early retirement of debt in
connection with a $700.0 million debt tender offer. During 2009, we also recognized a $7.8 million gain as a
result of repurchasing $396.7 million principal amount of debt. During 2009, we recorded litigation settlement
proceeds of $2.7 million in connection with the Bangor, Maine legal matter.
During 2008, we retired certain debt and recognized a loss of $6.3 million on the early extinguishment of
debt at a premium, mainly for the 9.25% Senior Notes due 2011. During 2008, we recorded legal fees and
settlement costs in connection with the Bangor, Maine legal matter of $1.0 million. During 2007, we incurred
$4.1 million of fees associated with a bridge loan facility. In 2007, we retired certain debt and recognized a loss
of $18.2 million on the early extinguishment of debt at a premium, mainly for the 7.625% Senior Notes due
2008. During 2009, 2008 and 2007, we recognized income of $2.7 million, $4.5 million and $2.0 million,
respectively, in connection with certain retained liabilities that have terminated, associated with customer
advances for construction from our disposed water properties.
(11) Company Obligated Mandatorily Redeemable Convertible Preferred Securities:
As of December 31, 2008, we fully redeemed the EPPICS related debt outstanding to third parties. The
following disclosure provides the history regarding this issue.
In 1996, our consolidated wholly-owned subsidiary, Citizens Utilities Trust (the Trust), issued, in an
underwritten public offering, 4,025,000 shares of EPPICS, representing preferred undivided interests in the
assets of the Trust, with a liquidation preference of $50 per security (for a total liquidation amount of $201.3
million). These securities had an adjusted conversion price of $11.46 per share of our common stock. The
conversion price was reduced from $13.30 to $11.46 during the third quarter of 2004 as a result of the $2.00
per share of common stock special, non-recurring dividend. The proceeds from the issuance of the Trust
Convertible Preferred Securities and a Company capital contribution were used to purchase $207.5 million
aggregate liquidation amount of 5% Partnership Convertible Preferred Securities due 2036 from another
wholly-owned subsidiary, Citizens Utilities Capital L.P. (the Partnership). The proceeds from the issuance of
the Partnership Convertible Preferred Securities and a Company capital contribution were used to purchase
from us $211.8 million aggregate principal amount of 5% Convertible Subordinated Debentures due 2036. The
sole assets of the Trust were the Partnership Convertible Preferred Securities, and our Convertible Subordinated
Debentures were substantially all the assets of the Partnership. Our obligations under the agreements related to
the issuances of such securities, taken together, constituted a full and unconditional guarantee by us of the
Trust’s obligations relating to the Trust Convertible Preferred Securities and the Partnership’s obligations
relating to the Partnership Convertible Preferred Securities.
In accordance with the terms of the issuances, we paid the annual 5% interest in quarterly installments on
the Convertible Subordinated Debentures in 2008 and 2007. Cash was paid (net of investment returns) to the
Partnership in payment of the interest on the Convertible Subordinated Debentures. The cash was then
distributed by the Partnership to the Trust and then by the Trust to the holders of the EPPICS.
F-21
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements