Windstream 2012 Annual Report Download - page 154

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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F-56
5. Long-term Debt and Capital Lease Obligations, Continued:
Notes Issued by Subsidiaries
Windstream Holdings of the Midwest, Inc. - Debt held by Windstream Holdings of the Midwest, Inc., a subsidiary, is secured
solely by the assets of the subsidiary.
PAETEC 2015 Notes - In connection with our acquisition of PAETEC on November 30, 2011, we assumed the 9.500 percent
notes due July 15, 2015 ("PAETEC 2015 Notes") with an aggregate principal amount of $300.0 million. Interest is payable
semi-annually.
On January 3, 2012, we retired $150.0 million of the outstanding PAETEC 2015 Notes, in relation to our call for redemption
announced on December 2, 2011. On February 21, 2012, we retired the remaining $150.0 million outstanding of the PAETEC
2015 Notes, in relation to our call for redemption announced on January 20, 2012. We paid total consideration of $1,048 per
$1,000 aggregate principal amount of PAETEC 2015 Notes, plus accrued and unpaid interest to, but excluding, the redemption
date. The redemption was made using borrowings on our revolving line of credit.
PAETEC 2017 Notes - In connection with our acquisition of PAETEC on November 30, 2011, we assumed the 8.875 percent
notes due June 30, 2017 ("PAETEC 2017 Notes") with an aggregate principal amount of $650.0 million. Interest is payable
semi-annually.
PAETEC 2018 Notes - In connection with our acquisition of PAETEC on November 30, 2011, we assumed the 9.875 percent
notes due December 1, 2018 ("PAETEC 2018 Notes") with an aggregate principal amount of $450.0 million. Interest is payable
semi-annually.
We may call certain debentures and notes at various premiums on early redemption. These debentures and notes are the 2018
Notes, 2019 Notes, 2020 Notes, 2021 Notes, 2022 Notes, 2023 Notes, the PAETEC 2017 Notes and the PAETEC 2018 Notes.
Additionally, we may call debt held by Windstream Holdings of the Midwest, Inc. at various premiums on early redemption.
Premium on long-term debt, net of discounts
The premium on long-term debt, net of discounts is primarily due to the debt issuance premium recorded on the debt acquired
in the PAETEC acquisition, partially offset by the net discount recorded on debt discussed above. The premium and discount
balances are amortized over the life of the debt instrument.
Debt Compliance
The terms of the credit facility and indentures include customary covenants that, among other things, require us to maintain
certain financial ratios and restrict our 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 dividend and certain other types of payments. 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. As of December 31, 2012, we were in compliance with all of our covenants.
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.
In addition, 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. We were in compliance with these covenants as of December 31, 2012.
Maturities for debt outstanding as of December 31, 2012 for each of the twelve month periods ending December 31, 2013,
2014, 2015, 2016 and 2017 are $866.1 million, $85.1 million, $92.6 million, $350.8 million and $1,964.6 million, respectively.