Frontier Communications 2010 Annual Report Download - page 78

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The Company accepted for purchase, in accordance with the terms of the tender offer referred to above,
approximately $564.4 million aggregate principal amount of the 2011 Notes and approximately $83.4 million
of the 2013 Notes tendered during the tender period, which expired on October 16, 2009. The aggregate
consideration for these debt repurchases was $701.6 million, which was financed with the proceeds of the debt
offering described above and cash on hand. The repurchases resulted in a loss on the early retirement of debt of
$53.7 million, which we recognized and included in Other income (loss), net in our consolidated statement of
operations for the year ended December 31, 2009.
In addition to the debt tender offer, we used $388.9 million of the debt offering proceeds in 2009 to
repurchase $396.7 million principal amount of debt, consisting of $280.8 million of the 2011 Notes, $54.1
million of our 7.875% Senior Notes due January 15, 2027, $35.9 million of the 2013 Notes, $16.0 million of
our 7.125% Senior Notes due March 15, 2019 and $9.9 million of our 6.80% Debentures due August 15, 2026.
As a result of these repurchases, a $7.8 million net gain was recognized and included in Other income (loss),
net in our consolidated statement of operations for the year ended December 31, 2009.
As a result of these 2009 debt financing, tender activities and other debt repurchases described above, as
of December 31, 2010, our 2011 debt maturity was reduced to $280.0 million.
During 2008, we retired an aggregate principal amount of $144.7 million of debt, consisting of $128.7
million principal amount of the 2011 Notes, $12.0 million of other senior unsecured debt and rural utilities
service loan contracts, and $4.0 million of 5% Company Obligated Mandatorily Redeemable Convertible
Preferred Securities (EPPICS).
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 2.06% as of December 31, 2010.
The interest rate is 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 the 2011 Notes and to pay for the $6.3 million of premium on early retirement of these
notes.
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 $15.5 million were received in January 2008. The related gain has been
deferred on the consolidated balance sheet, and is being amortized into interest expense over the term of the
associated debt.
As of December 31, 2010, we were in compliance with all of our debt and credit facility financial
covenants.
Our principal payments for the next five years are as follows as of December 31, 2010:
($ in thousands)
Principal
Payments
2011............................................................................. $280,002
2012............................................................................. $180,366
2013............................................................................. $709,855
2014............................................................................. $600,517
2015............................................................................. $800,549
(8) Derivative Instruments and Hedging Activities:
Interest rate swap agreements were used to hedge a portion of our debt that is subject to fixed interest
rates. Under our interest rate swap agreements, we agreed to pay an amount equal to a specified variable rate of
interest times a notional principal amount, and to receive in return an amount equal to a specified fixed rate of
interest times the same notional principal amount. The notional amounts of the contracts were not exchanged.
No other cash payments are made unless the agreement is terminated prior to maturity, in which case the
amount paid or received in settlement is established by agreement at the time of termination and represents the
F-19
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements