Frontier Communications 2010 Annual Report Download - page 77

Company’s previously existing revolving credit facility. As of December 31, 2010, we have 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.
On April 12, 2010, and in anticipation of the Merger, the entity then holding the assets of the Acquired
Business completed a private offering for $3.2 billion aggregate principal amount of Senior Notes (the Senior
Notes). The gross proceeds of the offering, plus $125.5 million (the Transaction Escrow) contributed by
Frontier, were deposited into an escrow account. Immediately prior to the Merger, the proceeds of the notes
offering (less the initial purchasers’ discount) were released from the escrow account and used to make a
special cash payment to Verizon, as contemplated by the Transaction, with amounts in excess of the special
cash payment and the initial purchasers’ discount received by the Company (approximately $53.0 million). In
addition, the $125.5 million Transaction Escrow was returned to the Company.
Upon completion of the Merger on July 1, 2010, we entered into a supplemental indenture with The Bank
of New York Mellon, as Trustee, pursuant to which we assumed the obligations under the Senior Notes. The
Senior Notes were recorded at their fair value on the date of acquisition, which was approximately $3.2 billion.
The Senior Notes consist of $500.0 million aggregate principal amount of Senior Notes due 2015 (the
2015 Notes), $1.1 billion aggregate principal amount of Senior Notes due 2017 (the 2017 Notes), $1.1 billion
aggregate principal amount of Senior Notes due 2020 (the 2020 Notes) and $500.0 million aggregate principal
amount of Senior Notes due 2022 (the 2022 Notes).
The 2015 Notes have an interest rate of 7.875% per annum, the 2017 Notes have an interest rate of 8.25%
per annum, the 2020 Notes have an interest rate of 8.50% per annum and the 2022 Notes have an interest rate
of 8.75% per annum. The Senior Notes were issued at a price equal to 100% of their face value. In the third
quarter of 2010, we completed an exchange offer for the privately placed Senior Notes for registered notes.
Upon completion of the Merger on July 1, 2010, we also assumed additional debt of $250.0 million,
including $200.0 million aggregate principal amount of 6.73% Senior Notes due February 15, 2028 and $50.0
million aggregate principal amount of 8.40% Senior Notes due October 15, 2029.
During 2009, we retired an aggregate principal amount of $1,048.3 million of debt, consisting of $1,047.3
million of senior unsecured debt, as described in more detail below, and $1.0 million of rural utilities service
loan contracts.
On October 1, 2009, we completed a registered debt offering of $600.0 million aggregate principal amount
of 8.125% senior unsecured notes due 2018. The issue price was 98.441% of the principal amount of the notes,
and we received net proceeds of approximately $578.7 million from the offering after deducting underwriting
discounts and offering expenses. We used the net proceeds from the offering, together with cash on hand, to
finance a cash tender offer for up to $700.0 million to purchase our outstanding 9.250% Senior Notes due 2011
(the 2011 Notes) and our outstanding 6.250% Senior Notes due 2013 (the 2013 Notes), as described below.
On April 9, 2009, we completed a registered offering of $600.0 million aggregate principal amount of
8.25% senior unsecured notes due 2014. The issue price was 91.805% of the principal amount of the notes. We
received net proceeds of approximately $538.8 million from the offering after deducting underwriting discounts
and offering expenses.
F-18
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements