CenturyLink 2015 Annual Report Download - page 165

Covenants
Certain of our loan agreements contain various restrictions, as described more fully below. Under current
circumstances, we believe the covenants currently in effect place no significant restriction on the transfer of
funds from our consolidated subsidiaries to CenturyLink.
The senior notes of CenturyLink, Inc. were issued under an indenture dated March 31, 1994. This indenture
restricts our ability to (i) incur, issue or create liens upon our property and (ii) consolidate with or merge into, or
transfer or lease all or substantially all of our assets to any other party. The indenture does not contain any
provisions that are impacted by our credit ratings or that restrict the issuance of new securities in the event of a
material adverse change to us. However, if the credit ratings relating to certain of our long-term debt securities
issued under this indenture are downgraded in the manner specified thereunder in connection with a “change of
control” of CenturyLink, Inc., then we will be required to offer to repurchase such debt securities.
The senior notes of Qwest Corporation were issued under indentures dated April 15, 1990 and October 15,
1999. These indentures contain restrictions on the incurrence of liens and the consummation of certain
transactions substantially similar to the above-described covenants in CenturyLink, Inc.’s March 31, 1994
indenture. The senior notes of Qwest Capital Funding, Inc. were issued under an indenture dated June 29, 1998
containing terms substantially similar to those set forth in Qwest Corporation’s indentures.
Embarq’s senior notes were issued pursuant to an indenture dated as of May 17, 2006. While Embarq is
generally prohibited from creating liens on its property unless its senior notes are secured equally and ratably,
Embarq can create liens on its property without equally and ratably securing its senior notes so long as the sum of
all indebtedness so secured does not exceed 15% of Embarq’s consolidated net tangible assets. The indenture
contains customary events of default, none of which are impacted by Embarq’s credit rating.
None of the above-listed indentures of CenturyLink, Inc., Qwest Corporation, Qwest Capital Funding, Inc.
and Embarq contain any financial covenants or restrictions on the ability to issue new securities in accordance
with the terms of the indenture.
Several of our Embarq subsidiaries have outstanding first mortgage bonds. Each issue of these first
mortgage bonds is secured by substantially all of the property, plant and equipment of the issuing subsidiary.
Approximately 10% of our net property, plant and equipment is pledged to secure the long-term debt of
subsidiaries.
Under the Credit Facility, we, and our indirect subsidiary, Qwest Corporation, must maintain a debt to
EBITDA (earnings before interest, taxes, depreciation and amortization, as defined in our Credit Facility) ratio of
not more than 4.0:1.0 and 2.85:1.0, respectively, as of the last day of each fiscal quarter for the four quarters then
ended. The Credit Facility also contains a negative pledge covenant, which generally requires us to secure
equally and ratably any advances under the Credit Facility if we pledge assets or permit liens on our property for
the benefit of other debtholders. The Credit Facility also has a cross payment default provision, and the Credit
Facility and certain of our debt securities also have cross acceleration provisions. When present, these provisions
could have a wider impact on liquidity than might otherwise arise from a default or acceleration of a single debt
instrument. Our debt to EBITDA ratios could be adversely affected by a wide range of events, including
unforeseen expenses or contingencies. This could reduce our financing flexibility due to potential restrictions on
incurring additional debt under certain provisions of our debt agreements or, in certain circumstances, could
result in a default under certain provisions of such agreements.
CenturyLink, Inc. and Qwest Corporation are both indebted under term loans, each of which includes
covenants substantially similar to those set forth in the Credit Facility.
At December 31, 2015, we believe we were in compliance with all of the provisions and covenants
contained in our Credit Facility and other material debt agreements.
B-57