Windstream 2013 Annual Report Download - page 193

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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5. Long-term Debt and Capital Lease Obligations, Continued:
2023 Notes - On January 23, 2013, Windstream Corp. completed the private placement of $700.0 million in aggregate principal
amount of 6.375 percent senior unsecured notes due August 1, 2023, at an issue price at par to yield 6.375 percent ("the 2023
Notes"). Interest is paid semi-annually. Debt issuance costs associated with the new borrowings were $13.9 million, which were
recorded in other assets in the accompanying consolidated balance sheet and will be amortized into interest expense over the
life of the borrowings.
Debentures and Notes Repaid in 2013 and 2012
2013 Notes - On August 1, 2013, Windstream Corp. repaid at maturity all of the outstanding $800.0 million aggregate principal
amount of these senior unsecured notes utilizing available borrowings under the revolving line of credit.
2019 Notes - On August 12, 2013, Windstream Corp. announced a tender offer to purchase for cash all of the outstanding
$500.0 million aggregate principal amount of 7.000 percent senior unsecured notes due March 15, 2019 ("2019 Notes"). Prior
to the expiration of the tender offer, approximately $431.2 million of the 2019 Notes had been tendered. On September 25,
2013, the redemption of the remaining $68.8 million outstanding principal amount was settled. Proceeds from the issuance of
the 2021 Notes, together with available cash, were used to pay the consideration for the tender offer and to redeem the
outstanding 2019 Notes, along with related fees and expenses.
PAETEC 2017 Notes - In connection with our acquisition of PAETEC on November 30, 2011, Windstream Corp. assumed
$650.0 million of 8.875 percent notes due June 30, 2017 ("PAETEC 2017 Notes") Interest was payable semi-annually. On
January 8, 2013, Windstream Corp. announced a tender offer to purchase for cash any and all of the outstanding $650.0 million
aggregate principal amount of PAETEC 2017 Notes. Prior to the expiration of the tender offer, approximately $588.5 million of
the PAETEC 2017 Notes had been tendered. On February 25, 2013, the redemption of the remaining $61.5 million outstanding
principal amount was settled. Proceeds from the issuance of the 2023 Notes, together with available cash, were used to pay the
consideration for the tender offer and to redeem all of the outstanding PAETEC 2017 Notes, along with related fees and
expenses.
PAETEC 2015 Notes - In connection with our acquisition of PAETEC on November 30, 2011, Windstream Corp. also assumed
the 9.500 percent notes due July 15, 2015 ("PAETEC 2015 Notes") with an aggregate principal amount of $300.0 million with
interest payable semi-annually. During the first quarter of 2012, Windstream Corp. retired all $300.0 million of the outstanding
PAETEC 2015 Notes. The redemption was funded using borrowings from Windstream Corp.'s revolving line of credit.
Windstream Corp. may call certain debentures and notes at various premiums on early redemption. These debentures and notes
are the 2018 Notes, 2020 Notes, 2021 Notes, 2022 Notes, both series of 2023 Notes and the PAETEC 2018 Notes. In addition,
Windstream Corp. may call debt issued 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 and the August 26, 2013 private placement of the additional 2021 Notes partially offset by the net
discount recorded on certain debt obligations listed in the table above. The premium and discount balances are amortized using
the interest method over the life of the related debt instrument.
Debt Compliance
The terms of Windstream Corp.'s credit facility and indentures include customary covenants that, among other things, require
maintenance of certain financial ratios and restrict Windstream Corp.'s 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, 2013, Windstream Corp.
was in compliance with all of these covenants.