Windstream 2008 Annual Report Download - page 149

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Debt, Continued:
Windstream has a five-year $500.0 million unsecured line of credit under a revolving credit agreement with an
expiration date of July 17, 2011. Letters of credit are deducted in determining the total amount available for
borrowing under the revolving credit agreement. Accordingly, the total amount outstanding under the letters of
credit and the indebtedness incurred under the revolving credit agreement may not exceed $500.0 million. At
December 31, 2008, the amount available for borrowing under the revolving credit agreement was $343.2 million.
The terms of the credit facility and indentures include customary covenants that, among other things, require
Windstream to maintain certain financial ratios and restrict its ability to incur additional indebtedness. These
financial ratios include a maximum leverage ratio of 4.5 to 1.0 and a minimum interest coverage ratio of 2.75 to
1.0. In addition, the covenants include restrictions on capital expenditures, which must not exceed a specified
amount for any fiscal year (for 2009 this amount was $582.5 million, which included $132.5 million of unused
capacity from 2008). The Company was in compliance with all covenants as of December 31, 2008.
Maturities and sinking fund requirements for the five years after 2008 for long-term debt outstanding as of
December 31, 2008, were $24.3 million for 2009, $24.0 million for 2010, $453.8 million for 2011, $27.5 million
for 2012 and $2,133.0 million for 2013.
Interest expense was as follows for the years ended December 31:
(Millions) 2008 2007 2006
Interest expense related to long-term debt (a) $ 391.9 $ 443.6 $ 210.8
Impacts of interest rate swaps 26.3 4.3 1.1
Other interest expense 0.1 0.2 0.4
Less capitalized interest expense (1.9) (3.7) (2.7)
Total interest expense $ 416.4 $ 444.4 $ 209.6
(a) In connection with the refinancing transaction, the Company recorded additional non-cash interest expense of
$5.3 million during 2007, due to a write-off of the unamortized debt issuance costs associated with $500.0
million of the Tranche B loan that was repaid.
During the third quarter of 2006, the Company incurred $7.9 million in prepayment penalties upon the early
retirement of a portion of its subsidiary debt. This debt was repaid using proceeds from a portion of the senior
secured credit facilities issued pursuant to the spin off from Alltel. These debt prepayment penalties are included
in loss on extinguishment of debt in the accompanying consolidated statement of income for the year ended
December 31, 2006.
In order to mitigate the interest rate risk inherent in its variable rate senior secured credit facilities, the Company
entered into four identical pay fixed, receive variable interest rate swap agreements whose notional value totaled
$1,281.2 million at December 31, 2008. See Note 2 for more information related to the Company’s derivative
instruments.
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