Cincinnati Bell 2009 Annual Report Download - page 142

Interest on the 8
1
⁄ 4 % Senior Notes is payable semi-annually in cash in arrears on April 15 and October 15 of
each year, commencing April 15, 2010. The 8
1
⁄ 4 % Senior Notes are unsecured senior obligations ranking equally
with all existing and future senior debt and ranking senior to all existing and future senior subordinated
indebtedness and subordinated indebtedness. Each of the Company’s current and future subsidiaries that is a
guarantor under the Corporate credit facility is also a guarantor of the 8
1
⁄ 4 % Senior Notes on an unsecured senior
basis, with certain immaterial exceptions. The indenture governing the 8
1
⁄ 4 % Senior Notes contains covenants
including but not limited to the following: limitations on dividends to shareowners and other restricted payments;
dividend and other payment restrictions affecting the Company’s subsidiaries such that the subsidiaries are not
permitted to enter into an agreement that would limit their ability to make dividend payments to the parent;
issuance of indebtedness; asset dispositions; transactions with affiliates; liens; investments; issuances and sales of
capital stock of subsidiaries; and redemption of debt that is junior in right of payment. The indenture governing
the 8
1
⁄ 4 % Senior Notes provides for customary events of default, including a cross-default provision for both
nonpayment at final maturity or acceleration due to a default of any other existing debt instrument that exceeds
$35 million.
The Company may redeem the 8
1
⁄ 4 % Senior Notes for a redemption price of 104.125%, 102.063%, and
100.000% after October 15, 2013, 2014, and 2015, respectively. At any time prior to October 15, 2013, the
Company may redeem all or part of the 8
1
⁄ 4 % Senior Notes at a redemption price equal to the sum of (1) 100% of
the principal, plus (2) the greater of (a) 1% of the face value of the 8
1
⁄ 4 % Senior Notes or (b) the excess over the
principal amount of the sum of the present values of (i) 104.125% of the face value of the 8
1
⁄ 4 % Senior Notes,
and (ii) interest payments due from the date of redemption to October 15, 2013, in each case discounted to the
redemption date on a semi-annual basis at the applicable U.S. Treasury rates plus one-half percent, plus
(3) accrued and unpaid interest, if any, to the date of redemption. Prior to October 15, 2012, the Company may
redeem up to a maximum of 35% of the aggregate principal amount of the 8
1
⁄ 4 % Senior Notes with the net cash
proceeds of one or more equity offerings by the Company, at a redemption price equal to 108.250% of the
principal amount thereof, plus accrued and unpaid interest thereon, if any, to the redemption date. The Company
incurred interest expense related to these notes of $9.7 million in 2009.
7
1
⁄ 4 % Senior Notes due 2013
In July 2003, the Company issued $500 million of 7
1
⁄ 4 % Senior Notes due 2013. Net proceeds, after
deducting fees and expenses, totaled $488.8 million and were used to prepay term credit facilities and
permanently reduce commitments under the Company’s then existing revolving credit facility.
In 2009, the net proceeds from the issuance of 8
1
⁄ 4 % Senior Notes discussed above were used to redeem the
outstanding 7
1
⁄ 4 % Senior Notes due 2013 of $439.9 million plus accrued and unpaid interest and related call
premium. As a result, the Company incurred a loss on debt extinguishment of $17.7 million, which consisted of
the call premium and write-off of debt issuance costs. Also in 2008 and 2007, the Company purchased and
extinguished $30.6 million and $26.4 million, respectively, of these Senior Notes and recognized a gain on
extinguishment of debt of $5.3 million in 2008 and a loss on extinguishment of debt of $0.4 million in 2007. The
Company recorded interest expense of $26.9 million in 2009, $33.8 million in 2008, and $35.3 million in 2007
related to these senior notes.
8
3
⁄ 8 % Senior Subordinated Notes due 2014
In November 2003, the Company issued $540 million of 8
3
⁄ 8 % Senior Subordinated Notes due 2014
(“8
3
⁄ 8 % Subordinated Notes”). The net proceeds, after deducting fees and expenses, totaled $528.2 million and
were used to purchase outstanding corporate bonds.
In February 2005, the Company issued an additional $100 million of 8
3
⁄ 8 % Senior Subordinated Notes
pursuant to the existing indenture. Net proceeds from this issuance together with those of the 7% Senior Notes
due 2015 and amounts under the Corporate credit facility were used to repay and terminate the prior credit
facility. All of the 8
3
⁄ 8 % Subordinated Notes constitute a single class of security with the same terms and are
fixed rate bonds to maturity.
Interest on the 8
3
⁄ 8 % Subordinated Notes is payable in cash semi-annually in arrears on January 15 and
July 15, commencing on July 15, 2004. The 8
3
⁄ 8 % Subordinated Notes are unsecured senior subordinated
72