Frontier Communications 2011 Annual Report Download - page 81

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
F-18
The entire facility was drawn upon execution of the Credit Agreement. Proceeds were used to repay in full the
remaining outstanding principal on three debt facilities (Frontier’s $200 million Rural Telephone Financing
Cooperative term loan maturing October 24, 2011, its $143 million CoBank term loan maturing December 31, 2012,
and its $130 million CoBank term loan maturing December 31, 2013) and the remaining proceeds will be used for
general corporate purposes.
The Credit Agreement contains customary representations and warranties, affirmative and negative covenants,
including a restriction on the Company’s ability to declare dividends if an event of default has occurred or will result
therefrom, a financial covenant that requires compliance with a leverage ratio, and customary events of default. Upon
proper notice, the Company may, in whole or in part, repay the facility without premium or penalty, but subject to
breakage fees on LIBOR loans, if applicable. Amounts pre-paid may not be re-borrowed.
We have a $750.0 million revolving credit facility. As of December 31, 2011, we had not made any borrowings
utilizing this facility. The terms of the credit facility are set forth in the Revolving 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 Revolving 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 Revolving Credit Agreement) and were 0.625% per annum
as of December 31, 2011. 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 Revolving Credit Agreement), at the Company’s election, plus a margin
specified in the Revolving 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.
We also have a $100.0 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).
An initial 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. The initial
commitments under the Letter of Credit Agreement expired on September 20, 2011, with the Bank exercising its option
to extend $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.
On April 12, 2010, in anticipation of the Transaction, 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 Transaction, 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 Transaction 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.