US Cellular 2010 Annual Report Download - page 25

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investments, and are recorded at amortized cost in the Consolidated Balance Sheet. The corporate notes
are guaranteed by the Federal Deposit Insurance Corporation. For these investments, U.S. Cellular’s
objective is to earn a higher rate of return on funds that are not anticipated to be required to meet
liquidity needs in the near term, while maintaining a low level of investment risk. See Note 3—Fair Value
Measurements in the Notes to Consolidated Financial Statements for additional details on Short-term and
Long-term investments.
Revolving Credit Facility
U.S. Cellular has a revolving credit facility available for general corporate purposes. On December 17,
2010, U.S. Cellular entered into a new $300 million revolving credit agreement with certain lenders and
other parties. Amounts under the new revolving credit facility may be borrowed, repaid and reborrowed
from time to time until maturity in December 2015. At December 31, 2010, there were no outstanding
borrowings and $0.2 million of outstanding letters of credit, leaving $299.8 million available for use. In
connection with U.S. Cellular’s new revolving credit facility, TDS and U.S. Cellular entered into a
subordination agreement dated December 17, 2010 together with the administrative agent for the lenders
under U.S. Cellular’s new revolving credit facility. At December 31, 2010, no U.S. Cellular debt was
subordinated pursuant to this subordination agreement.
U.S. Cellular’s interest cost on its new revolving credit facility is subject to increase if its current credit
rating from nationally recognized credit rating agencies is lowered, and is subject to decrease if the
rating is raised. The credit facility would not cease to be available nor would the maturity date accelerate
solely as a result of a downgrade in U.S. Cellular’s credit rating. However, a downgrade in U.S. Cellular’s
credit rating could adversely affect its ability to renew the credit facility or obtain access to other credit
facilities in the future.
During 2010, U.S. Cellular’s credit rating was downgraded from BBB+ to BBB by Fitch Ratings. As of
December 31, 2010, U.S. Cellular’s credit ratings from the nationally recognized credit rating agencies
including Fitch Ratings remained at investment grade.
The continued availability of the new revolving credit facility requires U.S. Cellular to comply with certain
negative and affirmative covenants, maintain certain financial ratios and make representations regarding
certain matters at the time of each borrowing. The covenants also prescribe certain terms associated
with intercompany loans from TDS or TDS subsidiaries to U.S. Cellular or U.S. Cellular subsidiaries. U.S.
Cellular believes it was in compliance as of December 31, 2010 with all of the covenants and
requirements set forth in its new revolving credit facility. There were no intercompany loans at
December 31, 2010 or 2009.
Long-Term Financing
U.S. Cellular had the following public debt outstanding as of December 31, 2010:
• $544,000,000 aggregate principal amount of 6.7% senior notes due December 15, 2033. U.S. Cellular
may redeem such notes, in whole or in part, at any time prior to maturity at a redemption price equal
to the greater of (a) 100% of the principal amount of such notes, plus accrued and unpaid interest, or
(b) the sum of the present values of the remaining scheduled payments of principal and interest
thereon discounted to the redemption date on a semi-annual basis at the Treasury Rate plus 30 basis
points.
• $330,000,000 aggregate principal amount of 7.5% senior notes due June 15, 2034. U.S. Cellular may
redeem the notes, in whole or in part, at any time on or after June 17, 2009, at a redemption price
equal to 100% of the principal amount redeemed plus accrued and unpaid interest.
U.S. Cellular’s long-term debt indenture does not contain any provisions resulting in acceleration of the
maturities of outstanding debt in the event of a change in U.S. Cellular’s credit rating. However, a
downgrade in U.S. Cellular’s credit rating could adversely affect its ability to obtain long-term debt
financing in the future. U.S. Cellular believes it was in compliance as of December 31, 2010 with all
covenants and other requirements set forth in its long-term debt indenture. U.S. Cellular has not failed to
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