Windstream 2014 Annual Report Download - page 137

F-21
vesting of restricted stock units. As previously discussed, in connection with the proposed spin-off and including the effects of
the 1-for-6 reverse stock split, we expect to lower our annual dividend from $1 per common share to $.60 per share. If the completion
of the proposed spin-off does not occur on the record date of Windstream's normal quarterly dividend, we intend to pay a pro rata
dividend to our shareholders based on the number of days elapsed in the quarter.
Pension Contribution
During the first quarter of 2014, we contributed 1.0 million shares of our common stock to the Windstream Pension Plan to meet
our quarterly 2014 funding requirements. At the time of the contribution, the common shares had an appraised value of
approximately $8.3 million, as determined by a third party valuation firm. During the third quarter of 2014, we contributed certain
of our owned real property to the Windstream Pension Plan. Independent appraisals of the properties contributed were obtained
and the Windstream Pension Plan recorded the contribution based on the properties’ aggregate fair value of $80.9 million. We
subsequently entered into leases for the contributed properties with initial lease terms of 10 years for certain properties and 20
years for the remaining properties at an aggregate annual rent of approximately $6.3 million. The lease agreements provide for
annual rent increases ranging from 2.0 percent to 3.0 percent over the initial lease term and may be renewed for up to three
additional five-year terms. The properties are managed on behalf of the Windstream Pension Plan by an independent fiduciary
and terms of the lease agreements were negotiated with the fiduciary on an arm’s-length basis.
In September 2013, we contributed 3.3 million shares of our common stock to fund our remaining 2013 funding obligation and a
portion of our expected 2014 funding obligation. At the time of the contribution, the common shares had an appraised value of
approximately $27.8 million, as determined by a third party valuation firm. Employer contributions for pension benefits in 2014
also included $0.7 million necessary to fund the expected benefit payments related to the unfunded supplemental executive
retirement pension plans. We did not make a pension contribution during 2012.
The 2015 expected employer contribution for pension benefits consists of $0.8 million necessary to fund the expected benefit
payments related to the unfunded supplemental executive retirement pension plans. The amount and timing of future contributions
to the qualified pension plan are dependent upon a myriad of factors including future investment performance, changes in future
discount rates and changes in the demographics of the population participating in the plan.
Debt and Dividend Capacity
Windstream Holdings has no debt obligations. All of our debt, including the facility described below, has been incurred by our
subsidiaries (primarily Windstream Corp.). Windstream Holdings is neither a guarantor of nor subject to the restrictive covenants
imposed by such debt.
As of December 31, 2014, we had $8,651.7 million in long-term debt outstanding, including current maturities (see Note 4). As
of December 31, 2014, the amount available for borrowing under Windstream Corp.’s revolving line of credit was $604.0 million.
At December 31, 2014, $625.0 million of borrowings outstanding under Windstream Corp.’s revolving line of credit are included
in current maturities of long-term debt as a result of these borrowings coming due on December 17, 2015. If not for the pending
spin-off of certain network and real estate assets, we would have amended the revolving line of credit and extended its maturity
during 2014. As previously discussed in conjunction with completing the proposed spin-off, we expect to lower long-term debt
by approximately $3.4 billion through receipt of a cash payment of $1.2 billion and completion of a $2.35 billion tax-free debt
exchange, of which borrowings outstanding under the revolving line of credit will be included. Currently, we anticipate that the
spin-off will occur in the first half of 2015. Following the spin-off, we intend to amend Windstream Corp.’s revolving line of credit
and extend its maturity to 2020. If completion of the spin-off is delayed or otherwise not consummated, we will proceed with our
plans to amend the revolving line of credit agreement and extend its maturity by June 30, 2015.
As previously discussed, on January 23, 2013, Windstream Corp. amended its existing senior secured credit facility to, among
other things: (i) provide for the incurrence of up to $1,345.0 million of additional term loans, the proceeds of which were used to
repay the full outstanding balance of the credit facility revolver, without any reduction in commitments, and for general corporate
purposes; and (ii) modify certain other definitions and provisions.
As of December 31, 2014, Windstream Corp. had approximately $1,396.5 million of restricted payment capacity as governed by
its credit facility, which limits the amount of dividends Windstream Corp. may distribute to Windstream Holdings for payment of
dividends to Windstream Holdings’ shareholders. Windstream Corp. builds additional capacity through cash generated from
operations while dividend payments, and other certain restricted investments reduce the available restricted payments capacity.
Windstream Corp. will continue to consider free cash flow accretive initiatives, including strategic opportunities and debt
repurchases.