Long-Term Debt and Revolving Promissory Note

3 Months Ended

Mar. 31, 2015

Long-Term Debt and Revolving Promissory Note

Long-term debt, including unamortized discounts and premiums and note payable - affiliate, were as follows:



	Interest Rates	Maturities	As of March 31, 2015			As of December 31, 2014
			(Dollars in millions)
Senior notes	6.125% - 8.375%	2015 - 2054	$	7,311		7,311
Term loan	1.930%	2025	100			—
Capital lease and other obligations	Various	Various	26			32
Unamortized premiums, net			30			36
Total long-term debt			7,467			7,379
Less current maturities			(112		)	(117	)
Long-term debt, excluding current maturities			$	7,355		7,262
Note payable - affiliate	6.657%	2022	$	796		796

Term Loan

On February 20, 2015, we entered into a term loan in the amount of $100 million with CoBank, ACB. The outstanding unpaid principal amount of this term loan plus any accrued and unpaid interest is due on February 20, 2025, the maturity date of the loan. Interest is paid monthly based upon either the London Interbank Offered Rate (“LIBOR”) or the base rate (as defined in the credit agreement) plus an applicable margin between 1.50% to 2.50% per annum for LIBOR loans and 0.50% to 1.50% per annum for base rate loans depending on our then current senior unsecured long-term debt rating. As of March 31, 2015, the outstanding principal balance on this term loan was $100 million.

Revolving Promissory Note

We are currently indebted to an affiliate of our ultimate parent company, CenturyLink, Inc. ("CenturyLink"), under a revolving promissory note that provides us with a funding commitment of up to $1.0 billion aggregate principal amount through June 30, 2022, of which $796 million was outstanding as of March 31, 2015. As of March 31, 2015, the weighted average interest rate was 6.657%. As of March 31, 2015 and December 31, 2014, this revolving promissory note is reflected on our consolidated balance sheets as a current liability under note payable - affiliate. As of March 31, 2015, $22 million of accrued interest is reflected in other current liabilities on our consolidated balance sheet. In accordance with the note agreement, all accrued interest and unpaid interest is capitalized to the unpaid principal balance on April 1 and November 1 of each year.

Covenants

The indentures governing our notes contain certain covenants including, but not limited to: (i) a prohibition on certain liens on our assets; and (ii) a limitation on mergers or sales of all, or substantially all, of our assets, which limitation requires that a successor assume the obligation with regard to these notes. These indentures do not contain any cross-default provisions.

Our senior notes were issued under indentures dated April 15, 1990 and October 15, 1999. These indentures do not contain any financial covenants, but do include restrictions that limit our ability to (i) incur, issue or create liens upon our property and (ii) consolidate with or merge into, transfer or lease all or substantially all of our assets to any other party.

As of March 31, 2015, we believe we were in compliance with the provisions and covenants of our debt agreements.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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