Windstream 2011 Annual Report Download - page 128

F-20
operations while dividend payments, share repurchases and other certain restricted investments reduce the available restricted
payments capacity. We will continue to consider free cash flow accretive initiatives, including strategic opportunities and debt
repurchases.
We are parties to four pay fixed, receive variable interest rate swap agreements. These agreements are designated as cash flow
hedges and serve to mitigate the interest rate risk inherent in our variable rate senior secured credit facilities. The original swap
agreements had a maturity date of July 17, 2013. During December 2010, we modified the agreements to extend their
maturities to match the senior secured credit facility debt they hedge. We also re-priced the swap agreements, resulting in cash
interest savings of $11.8 million for the year ended December 31, 2011, as compared to the same period in 2010. See Note 2 for
additional information regarding our interest rate swaps.
Debt Covenants and Amendments
The terms of our senior secured credit facilities and indentures, issued by Windstream, include customary covenants that,
among other things, require us to maintain certain financial ratios, restrict our ability to incur additional indebtedness and limit
certain cash payments, including our dividend payments. 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. The terms of the indentures assumed in connection with the acquisition of
PAETEC, include restrictions on the ability of the subsidiary to incur additional indebtedness, including a maximum leverage
ratio, with the most restrictive being 4.75 to 1.0.
On February 9, 2012, we announced that we are seeking to amend and restate our existing senior secured credit facilities to,
among other things, provide for the incurrence of $280.0 million of additional term loans, the proceeds of which will be used to
partially repay the credit facility revolver (without any reduction in commitments); extend the maturity of certain existing term
loans; provide for the ability to refinance and extend the maturity of any term loan or revolving loan with the consent of the
affected lenders; and modify certain other definitions and provisions. We expect to complete the amendment and restatement,
subject to the receipt of required consents and other customary conditions, in February 2012.
On August 11, 2011, in connection with our acquisition of PAETEC, we amended our senior secured credit agreement to,
among other things, (i) permit the issuance of bridge loans, (ii) permit the issuance and repayment of escrow notes, (iii) waive
guaranty and security requirements with regard to PAETEC and its subsidiaries, (iv) delete the capital expenditures covenant
and (v) waive any breach due to the change of control provisions under PAETEC's outstanding notes. In addition, we amended
the security agreement to, among other things, waive the obligation to grant security on accounts relating to escrow notes and
the proceeds of notes held in such accounts.
On September 17, 2010, we amended our credit facility to permit the signing of rural broadband stimulus grant agreements
with the Rural Utilities Service. We also increased the size of our secured leverage capacity. Specifically, we increased the size
of the secured incremental facility basket from $800.0 million to $1.6 billion. We are required to show pro-forma compliance
with a secured debt leverage ratio of 2.25 to 1.0 in order to borrow in excess of the first $800.0 million of the $1.6 billion
basket. On March 18, 2011, we increased the capacity under our senior secured revolving credit facility from $750.0 million to
$1,250.0 million. We had approximately $319.1 million of availability under our senior secured revolving credit facility and
can request up to an additional $850.0 million of commitments, loans or other extensions of credit under the optional
incremental facility of our credit agreement.
Scheduled principal payments for debt outstanding as of December 31, 2011 for each of the twelve month periods ended
December 31, 2012, 2013, 2014, 2015 and 2016 were $193.9 million, $1,254.0 million, $10.9 million, $2,091.5 million and
$0.1 million, respectively. Scheduled principal payments remaining after 2016 are $5,451.6 million.
Certain of our debt agreements contain various covenants and restrictions specific to the subsidiary that is the legal
counterparty to the agreement. Under our long-term debt agreements, acceleration of principal payments would occur upon
payment default, violation of debt covenants not cured within 30 days, a change in control including a person or group
obtaining 50 percent or more of our outstanding voting stock, or breach of certain other conditions set forth in the borrowing
agreements. At December 31, 2011, we were in compliance with all such covenants and restrictions.