Debt and Other Financing Arrangements | 8. Debt and Other Financing Arrangements The Company’s debt consists of the following: December 31, (dollars in millions) 2020 2019 Current portion of long-term debt: Credit Agreement - Tranche B Term Loan due 2024 $ 6.0 $ 6.0 Other financing arrangements 1.9 2.0 Finance lease liabilities 13.9 14.3 Current portion of long-term debt 21.8 22.3 Long-term debt, less current portion: Receivables Facility 182.0 131.5 Credit Agreement - Revolving Credit Facility 67.0 57.0 Credit Agreement - Tranche B Term Loan due 2024 580.5 586.5 7 1/4% 22.3 22.3 7% Senior Notes due 2024 625.0 625.0 8% Senior Notes due 2025 350.0 350.0 Various Cincinnati Bell Telephone notes 87.9 87.9 Other financing arrangements 0.9 3.2 Finance lease liabilities 52.1 59.5 1,967.7 1,922.9 Net unamortized premium 1.1 1.3 Unamortized note issuance costs (18.9 ) (22.9 ) Long-term debt, less current portion 1,949.9 1,901.3 Total debt $ 1,971.7 $ 1,923.6 Credit Agreement In the fourth quarter of 2017, the Company entered into a new Credit Agreement (the "Credit Agreement") and terminated the existing Corporate Credit Agreement. The Credit Agreement provides for (i) a five-year seven-year Borrowings under the Credit Agreement bear interest, at the Company's election, at a rate per annum equal to (i) LIBOR plus the applicable margin or (ii) the base rate plus the applicable margin. In the second quarter of 2018, the Company amended the Credit Agreement to reduce the applicable margin on the Revolving Credit Facility and Tranche B Term Loan due 2024. The LIBOR applicable margin for advances under the Revolving Credit Facility and Tranche B Term Loan due 2024 was changed from the previous 3.75% per annum to 3.25% per annum. The base rate applicable margin for advances under the Revolving Credit Facility and Tranche B Term Loan due 2024 was changed from 2.75% per annum to 2.25% per annum. Base rate is the higher of (i) the bank prime rate, (ii) the one-month LIBOR rate plus 1.00% and (iii) the federal funds rate plus 0.5%. In the case of the Tranche B Term Loan due 2024, the LIBOR rate may not fall below 1.00%. In addition, the Company will be required to pay a commitment fee on any unused portion of the Revolving Credit Facility at a rate of 0.50% per annum, or, if the consolidated total leverage ratio of the Company and its restricted subsidiaries is equal to or less than 3.25 to 1.00, 0.375% per annum. The Company will also pay customary letter of credit fees, including a fronting fee equal to 0.125% per annum of the dollar equivalent of the maximum amount available to be drawn under all outstanding letters of credit, as well as customary issuance and administration fees. As a result of the amendment, the Company recorded a loss on extinguishment of debt of $1.3 million in 2018. At December 31, 2020, borrowings under the Credit Agreement's Revolving Credit Facility were $67.0 million, leaving $133.0 million available. The Revolving Credit Facility requires maintenance of a maximum consolidated secured leverage ratio of 3.50 to1.00 and a minimum consolidated interest coverage ratio of 1.50 to 1.00. The Company may voluntarily repay and reborrow outstanding loans under the Revolving Credit Facility at any time without a premium or a penalty, other than customary “breakage” costs with respect to LIBOR revolving loans. In addition, certain of our variable rate debt, including debt under the Credit Agreement and the Receivables Facility, uses LIBOR as one of the benchmarks for establishing the rate of interest and may be hedged with LIBOR-based interest rate derivatives. LIBOR is the subject of recent regulatory guidance and proposals for reform. These reforms and other pressures may cause LIBOR to be replaced with a new benchmark in the future or to perform differently than in the past. Recent announcements suggest that publication of U.S. Dollar LIBOR tenors will continue to be published until June 2023 with the exception of the one week and two month U.S. Dollar LIBOR tenors which will cease publication in December 2021. The consequences of these developments cannot be entirely predicted, but could include an increase in the cost of our variable rate indebtedness. Guarantors and Security Interests, Credit Agreement All existing and future subsidiaries of the Company (other than Cincinnati Bell Funding LLC (and any other similar special purpose receivables financing subsidiary), the Company's joint ventures, subsidiaries prohibited by applicable law from becoming guarantors, unrestricted subsidiaries and foreign subsidiaries) are required to guarantee borrowings under the Credit Agreement. Debt outstanding under the Credit Agreement is secured by perfected first priority pledges of and security interests in (i) substantially all of the equity interests of the Company's U.S. subsidiaries (other than subsidiaries of non-guarantors of the Credit Agreement) and 66% of the equity interests in certain first-tier foreign subsidiaries held by the Company and the guarantors under the Credit Agreement and (ii) certain personal property and intellectual property of the Company and its subsidiaries (other than that of non-guarantors of the Credit Agreement and certain other excluded property). Accounts Receivable Securitization Facility Cincinnati Bell Inc. and certain of its subsidiaries have an accounts receivable securitization facility ("Receivables Facility"). In the second quarter of 2020, the Company executed amendments to its Receivables Facility, which replaced, amended and added certain provisions and definitions to decrease the credit availability, renew the facility, which is subject to renewal every 364 days The amendments also added provisions for a successor to LIBOR in the event LIBOR is no longer applicable and made technical changes to account for the continued integration of the Company’s Hawaiian Telcom and OnX acquisitions into the facility. In addition, a provision was added that the LIBOR rate for the Receivables Facility may not fall below 0.75 %. Interest on the Receivables Facility is based on the LIBOR rate plus 1.2%. The average interest rate on the Receivables Facility was 2.3% in 2020. The Company pays letter of credit fees on letters of credit drawn under the securitization facility and also pays commitment fees on the unused portion of the total facility. Under this agreement, certain U.S. and Canadian subsidiaries, as originators, sell their respective trade receivables on a continuous basis to Cincinnati Bell Funding LLC (“CBF”) or Cincinnati Bell Funding Canada Ltd. ("CBFC"), wholly-owned consolidated subsidiaries of the Company. Although CBF and CBFC are wholly-owned consolidated subsidiaries of the Company, CBF and CBFC are legally separate from the Company and each of the Company’s other subsidiaries. Upon and after the sale or contribution of the accounts receivable to CBF or CBFC, such accounts receivable are legally assets of CBF and CBFC and, as such, are not available to creditors of other subsidiaries or the parent company. The Receivables Facility includes an option for CBF to sell, rather than borrow against, certain receivables on a non-recourse basis. As of December 31, 2020, there was no outstanding balance for accounts receivable sold. The transferors sell their respective trade receivables on a continuous basis to CBF or CBFC. In turn, CBF or CBFC grants, without recourse, a senior undivided interest in the pooled receivables to various purchasers, including commercial paper conduits, in exchange for cash while maintaining a subordinated undivided interest in the form of over-collateralization in the pooled receivables. The transferors have agreed to continue servicing the receivables for CBF and CBFC at market rates; accordingly, no servicing asset or liability has been recorded. For the purposes of consolidated financial reporting, the Receivables Facility is accounted for as secured financing. Because CBF and CBFC have the ability to prepay the Receivables Facility at any time by making a cash payment and effectively repurchasing the receivables transferred pursuant to the facility, the transfers do not qualify for "sale" treatment on a consolidated basis under ASC 860, "Transfers and Servicing." 7 1 4 In 1993, the Company issued $50.0 million of 7 1/4% 1 4 1 4 1 4 1 4 1 4 pari-passu Interest on the 7 1 4 1 4 1 4 7% Senior Notes due 2024 In the third quarter of 2016, the Company issued in a private offering $425.0 million aggregate principal amount of 7% Senior Notes due 2024 ("7% Senior Notes") at par. The Company issued an additional $200.0 million aggregate principal amount of 7% Senior Notes at a price of 105.000% in the fourth quarter of 2016. The 7% Senior Notes were issued pursuant to an indenture, dated as of September 22, 2016 (the “2024 Notes Indenture”), among the Issuer, the subsidiary guarantors and Regions Bank, as trustee (the “Trustee”). Under the 2024 Notes Indenture, the 7% Senior Notes are senior unsecured obligations of the Company, which rank equally in right of payment with all existing and future unsecured senior debt of the Company. The 7% Senior Notes are guaranteed on a joint and several basis by certain of the Company’s existing and future domestic subsidiaries. Each such guarantee is currently a senior unsecured obligation of the applicable guarantor, ranking equally with all existing and future unsecured senior debt of such guarantor and effectively subordinated to all existing and future secured indebtedness of such guarantor to the extent of the value of the assets securing that indebtedness. The 7% Senior Notes bear interest at a rate of 7% per annum, payable semi-annually on January 15 and July 15 of each year, beginning on January 15, 2017, to persons who are registered holders of the 7% Senior Notes on the immediately preceding January 1 and July 1, respectively. The 7% Senior Notes will mature on July 15, 2024. The Company may, at its option, redeem some or all of the 7% Senior Notes at any time at declining redemption prices equal to (i) 103.500% through September 14, 2021, (ii) 101.750% beginning on September 15, 2021 and (iii) 100.000% beginning on September 15, 2022 and thereafter, plus, in each case, accrued and unpaid interest, if any, to the applicable redemption date. The 2024 Notes Indenture contains covenants including but not limited to the following: limitations on dividends to shareowners and other restricted payments; dividend and other payment restrictions affecting the Company’s subsidiaries such that the subsidiaries are generally not permitted to enter into an agreement that would limit their ability to make dividend payments to the parent; issuance of indebtedness; asset dispositions; transactions with affiliates; liens; investments; issuances and sales of capital stock of subsidiaries; and redemption of debt that is junior in right of payment. The 2024 Notes Indenture provides for customary events of default, including a cross-default provision for both nonpayment at final maturity or acceleration due to a default of any other existing debt instrument that equals or exceeds $35 million. In June 2020, the Company solicited consents from the holders of the 7% Senior Notes (the “2024 Notes Consent Solicitation”) to amend the 2024 Notes Indenture to (i) amend the definition of “Change of Control” so that MIP’s acquisition of the Company would not constitute a Change of Control and (ii) add a definition of, and designate certain persons, including MIP and its affiliates and Ares Management Corporation and its affiliates as, “Permitted Holders” of the 7% Senior Notes. On July 2, 2020, the Company received the requisite consents from the holders of the 7% Senior Notes, and accordingly, the Company, together with the subsidiary guarantors, entered into the Sixth Supplemental Indenture with the Trustee to give effect to foregoing amendments effective concurrently with the consummation of the MIP Acquisition. Also as part of the 2024 Notes Consent Solicitation, the Company, the subsidiary guarantors and the Trustee agreed to further amend the 2024 Notes Indenture effective concurrently with the consummation of the MIP Acquisition to: (i) secure the 7% Senior Notes and the related guarantees on a pari-passu basis with the 8% Senior Notes and the senior secured credit facilities (subject to certain exceptions) expected to be entered into in connection with the MIP acquisition , and (ii) add a covenant to the that restricts the Company from redeeming all or part of the applicable series of 7% Senior Notes under Section 3.07 of the prior to September 15, 2021 . These further provisions will only be operative upon consummation of the MIP acquisition and subject to certain other conditions. 8% Senior Notes due 2025 In the fourth quarter of 2017, CB Escrow Corp. (the “Issuer”), an Ohio corporation and wholly owned subsidiary of Cincinnati Bell Inc., closed a private offering of $350 million aggregate principal amount of 8% Senior Notes due 2025 (“8% Senior Notes”) at par. The 8% Senior Notes were issued pursuant to an indenture, dated as of October 6, 2017 (the “2025 Notes Indenture”), between the Issuer and Regions Bank, as trustee. At the closing of the acquisition of Hawaiian Telcom, the Issuer merged with and into the Company, and the Company assumed the obligations of the Issuer under the 8% Senior Notes and the 2025 Notes Indenture. Under the 2025 Notes Indenture, the 8% Senior Notes are senior unsecured obligations of the Company, which rank equally in right of payment with all existing and future unsecured senior debt of the Company. The 8% Senior Notes are guaranteed on a joint and several basis by certain of the Company’s existing and future domestic subsidiaries. Under the 2025 Notes Indenture, each such guarantee is a senior unsecured obligation of the applicable guarantor, ranking equally with all existing and future unsecured senior debt of such guarantor and effectively subordinated to all existing and future secured indebtedness of such guarantor to the extent of the value of the assets securing that indebtedness. The 8% Senior Notes bear interest at a rate of 8.00% per annum, payable semi-annually on April 15 and October 15 of each year, beginning on April 15, 2018, to persons who are registered holders of the 8% Senior Notes on the immediately preceding April 1 and October 1, respectively. The 8% Senior Notes will mature on October 15, 2025. The Company may, at its option, redeem some or all of the 8% Senior Notes at any time at declining redemption prices equal to (i) 106.000% through October 14, 2021, (ii) 104.000% beginning on October 15, 2021, (iii) 102.000% beginning on October 15, 2022 and (iv) 100.000% beginning on October 15, 2023 and thereafter, plus, in each case, accrued and unpaid interest, if any, to the applicable redemption date. In June 2020, contemporaneously with the 2024 Notes Consent Solicitation, the Company solicited consents from the holders of the 8% Senior Notes (the “2025 Notes Consent Solicitation”) to amend the 2025 Notes Indenture to (i) amend the definition of “Change of Control” so that MIP’s acquisition of the Company would not constitute a Change of Control and (ii) add a definition of, and designate certain persons, including MIP and its affiliates and Ares Management Corporation and its affiliates as, “Permitted Holders” of the 8% Senior Notes. On July 2, 2020, the Company received the requisite consents from the holders of the 8% Senior Notes, and accordingly, the Compan y together with its subsidiary g uarantors entered into the Second Supplemental Indenture with the Trustee to give effect to foregoing amendments effective concurrently with the consummation of the MIP Acquisition. Also as part of the 2025 Notes Consent Solicitation, the Company, the subsidiary g uarantors and the Trustee agreed to further amend the 2025 Notes Indenture effective concurrently with the consummation of the MIP Acquisition to: (i) secure the 8% Senior Notes and the related guarantees on a pari-passu basis with the 7% Senior Notes and the senior secured credit facilities (subject to certain exceptions) expected to be entered into in connection with the MIP acquisition, and (ii) add a covenant to the 2025 Notes Indenture that restricts the Company from redeeming all or part of the applicable series of 8% Senior Notes under Section 3.07 of the 2025 Notes Indenture prior to October 15, 2021. These further provisions will only be operative upon consummation of the MIP acquisition and subject to certain other conditions . Any collateral granted by the Company (but not its subsidiaries) to secure the 8% Senior Notes will also secure the Issuer’s 7.25% Senior Notes due 2023 and any collateral granted by the Company’s subsidiary CBT to secure the 8% Senior Notes will also secure CBT’s 6.30% Senior Notes due 2028, in each case on an equal and ratable basis. Cincinnati Bell Telephone Notes In 1998, CBT's predecessor issued $150.0 million in aggregate principal of 6.30% unsecured senior notes due 2028 (the "CBT Notes"), which are guaranteed on a subordinated basis by the Company but not its subsidiaries. The indenture related to the CBT Notes does not subject the Company or CBT to restrictive financial covenants, but it does contain a covenant providing that if CBT incurs certain liens on its property or assets, CBT must secure the outstanding CBT Notes equally and ratably with the indebtedness or obligations secured by such liens. In 2017, CBT pledged its assets in support of the Company's debt under the Credit Agreement, and as a result, the CBT Notes became equally and ratably secured with the collateral granted by CBT that secure the debt under the Credit Agreement. The Company expects to enter into new senior secured credit facilities upon the consummation of the MIP acquisition, such that the new senior secured credit facilities will be equally and ratably secured with the collateral granted by CBT to secure the CBT Notes. Additionally, in connection with the 2024 Notes Consent Solicitation and the 2025 Notes Consent Solicitation, the Company has agreed to secure the 7% Senior Notes and the 8% Senior Notes on a pari-passu The maturity date of the CBT notes is in 2028, and the CBT Notes may be redeemed at any time at a redemption price equal to the greater of 100% of the principal amount of the CBT Notes to be redeemed or the sum of the present values of the remaining scheduled payments of principal and interest to maturity, plus accrued interest to the redemption date. The indenture governing the CBT Notes provides for customary events of default, including for failure to make any payment when due and for one or more defaults of any other existing debt instruments of the Company or CBT that exceeds $20.0 million, in the aggregate. Finance Lease Liabilities Finance lease liabilities represent our obligation for certain leased assets, including vehicles and various equipment. These leases generally contain renewal or buyout options. Debt Maturity Schedule The following table summarizes our annual principal maturities of debt and other financing arrangements for the five years subsequent to December 31, 2020, and thereafter: Other financing (dollars in millions) Debt arrangements Year ended December 31, 2021 $ 6.0 $ 1.9 2022 73.0 0.5 2023 210.3 0.4 2024 1,193.5 — 2025 350.0 — Thereafter 87.9 — 1,920.7 2.8 Net unamortized premium 1.1 — Unamortized note issuance costs (18.9 ) — Total debt $ 1,902.9 $ 2.8 Deferred Financing Costs Deferred financing costs are costs incurred in connection with obtaining long-term financing and renewing revolving credit agreements. Deferred financing costs are amortized on the effective interest method. The Company incurred deferred financing costs of $0.4 million and $0.8 million in 2020 and 2019, respectively, related to amending and renewing revolving credit agreements. The Company wrote-off deferred financing costs associated with the extinguishment of debt of $1.3 million in 2018. The Company records costs incurred in connection with obtaining revolving credit agreements as an asset. As of December 31, 2020 and 2019, deferred financing costs recorded to "Other non-current assets" totaled $2.0 million and $3.1 million, respectively. Amortization of deferred financing costs, included in "Interest expense" in the Consolidated Statements of Operations, totaled $5.9 million in 2020, $6.4 million in 2019, and $5.7 million in 2018. Debt Covenants Credit Agreement The Credit Agreement has financial covenants that require the Company to maintain certain leverage and interest coverage ratios. As of December 31, 2020, these ratios and limitations include a maximum secured consolidated total leverage ratio of 3.50 to 1.00 and a minimum consolidated interest coverage ratio of 1.50 to 1.00. In addition, the Credit Agreement contains customary affirmative and negative covenants, including but not limited to, restrictions on Company's ability to incur additional indebtedness, create liens, pay dividends, make certain investments, and prepay other indebtedness, sell, transfer, lease, or dispose of assets and enter into, or undertake, certain liquidations, mergers, consolidations or acquisitions. The Credit Agreement contains customary events of default (which are in some cases subject to certain exceptions, thresholds and grace periods), including, but not limited to, nonpayment of principal or interest, failure to perform or observe covenants, breaches of representations and warranties, cross-defaults with certain other indebtedness, certain bankruptcy-related events or proceedings, final monetary judgments or orders, ERISA defaults, invalidity of loan documents or guarantees, and certain change of control events. If the Company were to violate any of its covenants and were unable to obtain a waiver, it would be considered a default. If the Company were in default under the Credit Agreement, no additional borrowings under this facility would be available until the default was waived or cured. The Tranche B Term Loan due 2024 is subject to the same affirmative and negative covenants and events of default as the Revolving Credit Facility, except that a breach of the financial covenants will not result in an event of default under the Tranche B Term Loan due 2024 unless and until the agent or a majority in interest of the lenders under the Revolving Credit Facility have terminated their commitments under the Revolving Credit Facility and accelerated the loans then outstanding under the Revolving Credit Facility in response to such breach in accordance with the terms and conditions of the Credit Agreement. |