Windstream 2014 Annual Report Download - page 172

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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4. Long-term Debt and Lease Obligations, Continued:
Windstream Corp. may call certain debentures and notes at various premiums on early redemption. These debentures and notes
are the $400.0 million in aggregate principal amount of 8.125 percent senior unsecured notes due September 1, 2018 (“2018
Notes”), the 7.750 percent senior notes due October 15, 2020, 2021 Notes, the 7.500 percent senior notes due June 1, 2022, both
series of 2023 Notes and the 9.875 percent notes due December 1, 2018 (“PAETEC 2018 Notes”) with an aggregate principal
amount of $450.0 million. 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, 2014, Windstream Corp. was in compliance with
all of these covenants.
In addition, certain of Windstream Corp.’s debt agreements contain various covenants and restrictions specific to the subsidiary
that is the legal counterparty to the agreement. Under Windstream Corp.’s 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 Windstream Corp.’s outstanding voting stock, or breach of certain other conditions
set forth in the borrowing agreements. Windstream Corp. and its subsidiaries were in compliance with these covenants as of
December 31, 2014.
Maturities for long-term debt outstanding as of December 31, 2014, excluding $23.3 million of unamortized net premium, were
as follows for the years ended December 31:
Year (Millions)
2015 $ 717.5
2016 350.7
2017 1,314.5
2018 869.5
2019 574.1
Thereafter 4,802.1
Total $ 8,628.4
(Loss) Gain on Extinguishment of Debt
During the third quarter of 2013, Windstream Corp. retired all $500.0 million of the outstanding 2019 Notes using proceeds from
the private placement of the 2021 Notes. During the first quarter of 2013, Windstream Corp. also retired all $650.0 million of the
outstanding PAETEC 2017 Notes. As noted above, the PAETEC 2017 Notes were repurchased using proceeds from the issuance
of the 2023 Notes. Windstream Corp. also amended its senior secured credit facility including issuance of Tranche B4, the proceeds
of which were used to repay Tranche A2, Tranche B and Tranche B2 during the first quarter of 2013. The retirements and a portion
of the credit facility amendment were accounted for under the extinguishment method of accounting, and as a result, Windstream
Corp. recognized losses due to the extinguishment of the aforementioned debt obligations during 2013.