Long-Term Debt and Revolving Promissory Note

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



			As of December 31,
	Interest Rates	Maturities	2015			2014
			(Dollars in millions)
Senior notes	6.125% - 8.375%	2016 - 2055	$	7,229		7,311
Term loan	2.180%	2025	100			—
Capital lease and other obligations	Various	Various	17			32
Unamortized premiums, net			16			36
Unamortized debt issuance costs			(123		)	(110	)
Total long-term debt			7,239			7,269
Less current maturities			(242		)	(117	)
Long-term debt, excluding current maturities			$	6,997		7,152
Note payable-affiliate	6.758%	2022	$	855		796

New Issuances

2015

On September 21, 2015, we issued $400 million aggregate principal amount of 6.625% Notes due 2055, in exchange for net proceeds, after deducting underwriting discounts and other expenses, of approximately $386 million. The underwriting agreement included an over-allotment option granting the underwriters for the offering an opportunity to purchase additional 6.625% Notes due 2055. On September 30, 2015, we issued an additional $10 million aggregate principal amount of the 6.625% Notes under this over-allotment option. All of the 6.625% Notes are unsecured obligations and may be redeemed by us, in whole or in part, on or after September 15, 2020, at a redemption price equal to 100% of the principal amount redeemed plus accrued and unpaid interest to the redemption date.

2014

On September 29, 2014, we issued $500 million aggregate principal amount of 6.875% Notes due 2054, in exchange for net proceeds, after deducting underwriting discounts and other expenses, of $483 million. The Notes are senior unsecured obligations and may be redeemed, in whole or in part, on or after October 1, 2019, at a redemption price equal to 100% of the principal amount redeemed plus accrued and unpaid interest to the redemption date.

Repayments

2015

On October 13, 2015, we redeemed all $250 million of our 7.20% Notes due 2026, which resulted in an immaterial gain, and redeemed $150 million of our 6.875% Notes due 2033, which resulted in an immaterial loss.

On June 15, 2015, we paid at maturity the $92 million principal amount of our 7.625% Notes.

2014

On October 1, 2014, we paid at maturity the $600 million principal amount of our 7.50% Notes.

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. 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. At December 31, 2015, the outstanding principal balance on this term loan was $100 million.

Aggregate Maturities of Long-Term Debt

Set forth below is the aggregate principal amount of our long-term debt (excluding unamortized premiums and discounts, net and unamortized debt issuance costs and other and excluding note payable-affiliate) maturing during the following years:



	(Dollars in millions)⁽¹⁾
2016	$	242
2017	503
2018	3
2019	1
2020	—
2021 and thereafter	6,597
Total long-term debt	$	7,346

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⁽¹⁾Actual principal paid in all years may differ due to the possible future refinancing of outstanding debt or the issuance of new debt.

Revolving Promissory Note

We are currently indebted to an affiliate of our ultimate parent company, 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 $855 million was outstanding as of December 31, 2015. As of December 31, 2015, the weighted average interest rate was 6.758%. As of December 31, 2015 and 2014, this revolving promissory note is reflected on our consolidated balance sheets as a current liability under “Note payable-affiliate”. As of December 31, 2015, $5 million of accrued interest is reflected in other current liabilities on our consolidated balance sheet. In accordance with the note agreement, all accrued and unpaid interest is capitalized to the unpaid principal balance on June 1 and December 1 of each year.

Interest Expense

Interest expense includes interest on long-term debt. The following table presents the amount of gross interest expense, net of capitalized interest and interest expense-affiliates, net:



	Years Ended December 31,
	2015			2014		2013
	(Dollars in millions)
Interest expense:
Gross interest expense	$	491		481		467
Capitalized interest	(18		)	(17	)	(17	)
Total interest expense	$	473		464		450
Interest expense-affiliates, net	$	53		40		64

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 restrict our ability to (i) incur, issue or create liens upon our property and (ii) consolidate with or merge into, or transfer or lease all or substantially all of our assets to any other party.

At December 31, 2015, we believe we were in compliance with all of the provisions and covenants contained in our debt agreements.

Subsequent Event

In January 2016, we issued $235 million aggregate principal amount of 7% Notes due 2056, in exchange for net proceeds, after deducting underwriting discounts and other expenses, of approximately $227 million. All of the 7% Notes are unsecured obligations and may be redeemed by us, in whole or in part, on or after February 1, 2021, at a redemption price equal to 100% of the principal amount redeemed plus accrued and unpaid interest to the redemption date.