FairPoint Communications 2006 Annual Report Download - page 23
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under certain circumstances, including to pay dividends. Certain regulatory orders may similarly restrict or prohibit the Company’s subsidiaries from taking
such actions.
Covenants in our credit facility impose significant operating and financial restrictions on us. These restrictions prohibit or limit, among other things:
· the incurrence of additional indebtedness and the issuance by our subsidiaries of preferred stock;
· the payment of dividends on, and purchases or redemptions of, capital stock;
· a number of other restricted payments, including investments;
· the creation of liens;
· the ability of our subsidiaries to guarantee our and their indebtedness;
· specified sales of assets;
· the creation of encumbrances or restrictions on the ability of our subsidiaries to distribute and advance funds or transfer assets to us or any other
subsidiary;
· specified transactions with affiliates;
· sale and leaseback transactions;
· our ability to enter lines of business outside the communications business; and
· certain consolidations and mergers and sales and/or transfers of assets by or involving us.
Our credit facility also contains covenants which require us to maintain specified financial ratios and satisfy financial condition tests, including,
without limitation, a maximum total leverage ratio and a minimum interest coverage ratio.
As a result of general economic conditions, conditions in the lending markets, the results of our business or for any other reason, we may elect or be
required to amend or refinance our credit facility, at or prior to maturity, or enter into additional agreements for indebtedness. Any such amendment,
refinancing or additional agreement may contain covenants which could limit in a significant manner our operations and our ability to pay dividends on our
common stock.
Our ability to comply with the covenants, ratios or tests contained in our credit facility or in the agreements governing our future indebtedness may be
affected by events beyond our control, including prevailing economic, financial and industry conditions. A breach of any of these covenants, ratios or tests
could result in a default under our credit facility. Certain events of default under our credit facility would prohibit us from making dividend payments on our
common stock. In addition, upon the occurrence of an event of default under our credit facility, the lenders could elect to declare all amounts outstanding under
our credit facility, together with accrued interest, to be immediately due and payable. If we were unable to repay those amounts, the lenders could proceed
against the security granted to them to secure that indebtedness. If the lenders accelerate the payment of the indebtedness under our credit facility, our assets
may not be sufficient to repay in full the indebtedness under our credit facility and our other indebtedness, if any.
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