FairPoint Communications 2013 Annual Report Download - page 80

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78
redemption price of 108.75% of the principal amount of Notes redeemed, plus accrued and unpaid interest to the applicable
redemption date.
The holders of the Notes have the ability to require FairPoint Communications to repurchase all or any part of the Notes if
FairPoint Communications experiences certain kinds of changes in control or engages in certain asset sales, in each case at the
repurchase prices and subject to the terms and conditions set forth in the Indenture.
The Indenture contains certain covenants which are customary with respect to non-investment grade debt securities, including
limitations on FairPoint Communication's ability to incur additional indebtedness, pay dividends on or make other distributions
or repurchase FairPoint Communication's capital stock, make certain investments, enter into certain types of transactions with
affiliates, create liens and sell certain assets or merge with or into other companies. These covenants are subject to a number of
important limitations and exceptions. As of December 31, 2013, FairPoint Communications was in compliance with all covenants
under the Indenture.
The Indenture also provides for customary events of default, including cross defaults to other specified debt of FairPoint
Communications and certain of its subsidiaries.
Old Credit Agreement
On January 24, 2011, FairPoint Communications and FairPoint Logistics, Inc. (collectively, the "Old Credit Agreement
Borrowers") entered into a $1,075.0 million senior secured credit facility with a syndicate of lenders and Bank of America, N.A.,
as the administrative agent for the lenders (the "Old Credit Agreement"), comprised of a $75.0 million revolving facility (the "Old
Revolving Facility") and a $1.0 billion term loan (the "Old Term Loan" and together with the Old Revolving Facility, the "Old
Credit Agreement Loans"). On January 24, 2011, the Company paid to the lenders providing the Old Revolving Facility an
aggregate fee equal to $1.5 million. Interest on the Old Credit Agreement Loans accrued at an annual rate equal to either (a) LIBOR
plus 4.50%, with a minimum LIBOR floor of 2.00% for the Old Term Loan, or (b) a base rate plus 3.50% per annum, which base
rate was equal to the highest of (x) Bank of America's prime rate, (y) the federal funds effective rate plus 0.50% and (z) the
applicable LIBOR plus 1.00%. In addition, the Company was required to pay a 0.75% per annum commitment fee on the average
daily unused portion of the Old Revolving Facility. The entire outstanding principal amount of the Old Credit Agreement Loans
was to be due and payable on January 24, 2016. The Old Credit Agreement required quarterly repayments of principal of the Old
Term Loan after the first anniversary of January 24, 2011. During 2012 and in the first quarter of 2013, prior to the Old Credit
Agreement being retired, the Company made $43.0 million and $10.5 million, respectively, of principal payments on the Old Term
Loan.
The Old Credit Agreement contained customary representations, warranties and affirmative and negative covenants. The
Old Credit Agreement also contained minimum interest coverage and maximum total leverage maintenance covenants, along with
a maximum senior leverage covenant measured upon the incurrence of certain types of debt. As of December 31, 2012, the Old
Credit Agreement Borrowers were in compliance with all covenants under the Old Credit Agreement.
On February 14, 2013, the Company completed the Refinancing and repaid all amounts outstanding under the Old Credit
Agreement.
Debt Issue Costs
On February 14, 2013, the Company completed the Refinancing and capitalized $7.6 million of debt issue costs associated
with the New Credit Agreement and Notes. These debt issue costs are being amortized over a weighted average life of 6.2 years
using the effective interest method.
On January 24, 2011, the Company entered into the Old Credit Agreement and capitalized $2.4 million of debt issue costs
associated with the Old Credit Agreement. These debt issue costs were being amortized over a weighted average life of 3.7 years
using the effective interest method. Upon completion of the Refinancing, a significant portion of the Old Credit Agreement debt
issue costs were written off.
As of December 31, 2013 and 2012, the Company had capitalized debt issue costs of $7.1 million and $1.1 million,
respectively, net of amortization.
(9) Interest Rate Swap Agreements
The Company uses interest rate swap agreements to protect the Company against adverse fluctuations in interest rates
by reducing its exposure to variability in cash flows relating to interest payments on a portion of its outstanding debt. The Company's
interest rate swaps, which are designated as cash flow hedges, involve the receipt of variable amounts from counterparties in
exchange for the Company making fixed-rate payments over the effective term of the agreements without exchange of the underlying