FairPoint Communications 2011 Annual Report Download - page 27

Table of Contents
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As of December 31, 2011, we had $1.0 billion of total debt outstanding (including approximately $3.9 million of capital leases). In addition, as of
December 31, 2011, we had approximately $62.6 million, net of outstanding letters of credit, available for additional borrowing under our $75.0 million
revolving loan facility (the “Revolving Facility”).
Our overall indebtedness and the terms of our Credit Agreement could:
• require us to dedicate a significant portion of our cash flow from operations to paying the principal of and interest on our indebtedness,
thereby limiting the availability of our cash flow to fund future capital expenditures, working capital and other corporate purposes;
• limit our ability to obtain additional financing in the future for working capital, capital expenditures or acquisitions;
• limit our ability to refinance our indebtedness on terms acceptable to us or at all;
• restrict us from making strategic acquisitions or cause us to make non-strategic divestitures;
• limit our flexibility in planning for, or reacting to, changes in our business and the communications industry generally;
• place us at a competitive disadvantage compared with competitors that have a less significant debt burden; and
• make us more vulnerable to economic downturns and limit our ability to withstand competitive pressures.
Our ability to continue to fund our debt requirements and to reduce debt may be affected by general economic, financial market, competitive, legislative
and regulatory factors, among other things. An inability to fund our debt requirements, reduce debt or satisfy debt covenant requirements could have a
material adverse effect on our business, financial condition, results of operations, liquidity and/or the market price of our Common Stock.
In addition, all of our indebtedness under the Credit Agreement bears interest at variable rates. If market interest rates increase, variable rate debt will
create higher debt service requirements, which could adversely affect our cash flow. In addition, interest payments on the $1.0 billion term loan facility in our
Credit Agreement (the “Term Loan”) are subject to a British Bankers Association LIBOR rate (“LIBOR”) floor of 2.00%. While LIBOR remains below 2.00%
we will incur interest costs above market rates. While we may enter into agreements limiting our exposure to higher interest rates, these agreements may not
offer complete protection from this risk.
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We are a holding company and conduct no operations. Accordingly, our cash flow and our ability to make payments on, or repay or refinance, our
indebtedness and to fund planned capital expenditures and other cash needs will depend largely upon the cash flows of our operating subsidiaries and the
payment of funds by those subsidiaries to us in the form of repayment of loans, dividends, management fees or otherwise. Distributions to us from our
subsidiaries will depend on their respective operating results and will be subject to restrictions under, among other things,
• the laws of their jurisdiction of organization;
• the rules and regulations of state and federal regulatory authorities;
• agreements of those subsidiaries, including agreements governing their indebtedness; and
• regulatory restrictions.
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