Frontier Communications 2010 Annual Report Download - page 36

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.
Interest Rate Management
On January 15, 2008, we terminated all of our interest rate swap agreements representing $400.0 million
notional amount of indebtedness associated with our 2011 Notes and 2013 Notes. Cash proceeds from 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. We recognized $1.0 million, $7.6 million and $5.0 million of deferred gain during 2010, 2009 and 2008,
respectively, and anticipate recognizing an additional $1.0 million of deferred gain during 2011. At December
31, 2010 and 2009, we did not have any derivative instruments.
Letter of Credit Facility
On September 8, 2010, we entered into a $190.0 million unsecured letter of credit facility. The terms of
the letter of credit facility are set forth in a Credit Agreement, dated as of September 8, 2010, among the
Company, the Lenders party thereto, and Deutsche Bank AG, New York Branch (the Bank), as Administrative
Agent and Issuing Bank (the Letter of Credit Agreement). The letter of credit was issued in its entirety as of
December 31, 2010. The commitments under the Letter of Credit Agreement expire on September 20, 2011,
with a Bank option to extend up to $100.0 million of the commitments to September 20, 2012. The Company is
required to pay an annual facility fee on the available commitment, regardless of usage. The covenants binding
on the Company under the terms of the Letter of Credit Agreement are substantially similar to those in the
Company’s other credit facilities, including limitations on liens, substantial asset sales and mergers, subject to
customary exceptions and thresholds. A letter of credit for $190.0 million was issued to the West Virginia
Public Service Commission to guarantee certain of our capital investment commitments in West Virginia in
connection with the Transaction.
Credit Facility
On March 23, 2010, we entered into a $750.0 million revolving credit facility (the Credit Facility) that
became effective on July 1, 2010, concurrently with the closing of the Merger and the termination of the
Company’s previously existing revolving credit facility. As of December 31, 2010, we had not made any
borrowings utilizing this facility. The terms of the Credit Facility are set forth in the Credit Agreement, dated
as of March 23, 2010, among the Company, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as
Administrative Agent (the Credit Agreement). Associated facility fees under the Credit Facility will vary from
time to time depending on the Company’s credit rating (as defined in the Credit Agreement) and were 0.625%
per annum as of December 31, 2010. The Credit Facility is scheduled to terminate on January 1, 2014. During
the term of the Credit Facility, the Company may borrow, repay and reborrow funds, and may obtain letters of
credit, subject to customary borrowing conditions. Loans under the Credit Facility will bear interest based on
the alternate base rate or the adjusted LIBOR rate (each as determined in the Credit Agreement), at the
Company’s election, plus a margin specified in the Credit Agreement based on the Company’s credit rating.
Letters of credit issued under the Credit Facility will also be subject to fees that vary depending on the
Company’s credit rating. The Credit Facility will be available for general corporate purposes but may not be
used to fund dividend payments.
Covenants
The terms and conditions contained in our indentures, the Credit Agreement and the Letter of Credit
Agreement include the timely payment of principal and interest when due, the maintenance of our corporate
existence, keeping proper books and records in accordance with U.S. GAAP, restrictions on the incurrence of
liens on our assets, and restrictions on asset sales and transfers, mergers and other changes in corporate control.
We are not subject to restrictions on the payment of dividends either by contract, rule or regulation, other than
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FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES