Frontier Communications 2012 Annual Report Download - page 79

On August 15, 2012, the Company completed a registered offering of $600 million aggregate principal
amount of 7.125% senior unsecured notes due 2023 (the 2023 Notes), issued at a price of 100% of their
principal amount. We received net proceeds of $588.1 million from the offering after deducting underwriting
fees and offering expenses. The Company intends to use the net proceeds from the sale of the notes to
repurchase or retire existing indebtedness or for general corporate purposes.
On October 1, 2012, the Company completed a registered debt offering of $250 million aggregate
principal amount of the 2023 Notes, issued at a price of 104.250% of their principal amount, equating to an
effective yield of 6.551%. We received net proceeds of $255.9 million from the offering after deducting
underwriting fees and offering expenses. The notes are an additional issuance of, are fully fungible with and
form a single series voting together as one class with the $600 million aggregate principal amount of the 2023
Notes issued by the Company on August 15, 2012. The Company intends to use the net proceeds from the sale
of the notes to repurchase or retire existing indebtedness or for general corporate purposes.
On October 1, 2012, the Company accepted for purchase $75.7 million and $59.3 million aggregate
principal amount of the April 2015 Notes and its 8.250% Senior Notes due 2017 (the 2017 Notes), respectively,
in open market repurchases for total consideration of $154.7 million. The repurchases resulted in a loss on the
early retirement of debt of $19.3 million.
The Company has a credit agreement (the Credit Agreement) with CoBank, ACB, as administrative agent,
lead arranger and a lender, and the other lenders party thereto for a $575 million senior unsecured term loan
facility with a final maturity of October 14, 2016. The entire facility was drawn upon execution of the Credit
Agreement in October 2011. Repayment of the outstanding principal balance is made in quarterly installments
in the amount of $14,375,000, which commenced on March 31, 2012, with the remaining outstanding principal
balance to be repaid on the final maturity date. Borrowings under the Credit Agreement bear interest based on
the margins over the Base Rate (as defined in the Credit Agreement) or LIBOR, at the election of the
Company. Interest rate margins under the facility (ranging from 0.875% to 2.875% for Base Rate borrowings
and 1.875% to 3.875% for LIBOR borrowings) are subject to adjustments based on the Total Leverage Ratio of
the Company, as such term is defined in the Credit Agreement. The current pricing on this facility is LIBOR
plus 2.875%. The maximum permitted leverage ratio is 4.5 times. 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 were
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, 2012, we had not made any
borrowings under this facility. The terms of the credit facility are set forth in the credit agreement (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. 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, 2012. 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 is available for general corporate
purposes but may not be used to fund dividend payments.
F-18
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements