Long-term Debt and Lease Obligations:

Windstream Holdings has no debt obligations. All debt, including the senior secured credit facility described below, have been incurred by Windstream Services and its subsidiaries. Windstream Holdings is neither a guarantor of nor subject to the restrictive covenants imposed by such debt.

Long-term debt was as follows at:



(Millions)	March 31, 2015			December 31, 2014
Issued by Windstream Services:
Senior secured credit facility, Tranche A3 – variable rates, due December 30, 2016 (a)	$	333.5		$	344.3
Senior secured credit facility, Tranche A4 – variable rates, due August 8, 2017 (a)	247.5			255.0
Senior secured credit facility, Tranche B4 – variable rates, due January 23, 2020 (a)	1,314.7			1,318.1
Senior secured credit facility, Tranche B5 – variable rates, due August 8, 2019	582.6			584.1
Senior secured credit facility, Revolving line of credit – variable rates, due December 17, 2015 (b)	820.0			625.0
Debentures and notes, without collateral:
2017 Notes – 7.875%, due November 1, 2017	1,100.0			1,100.0
2018 Notes – 8.125%, due September 1, 2018 (c)	400.0			400.0
2020 Notes – 7.750%, due October 15, 2020	700.0			700.0
2021 Notes – 7.750%, due October 1, 2021	950.0			950.0
2022 Notes – 7.500%, due June 1, 2022	500.0			500.0
2023 Notes – 7.500%, due April 1, 2023	600.0			600.0
2023 Notes – 6.375%, due August 1, 2023	700.0			700.0
Issued by subsidiaries of Windstream Services:
Windstream Holdings of the Midwest, Inc. – 6.75%, due April 1, 2028	100.0			100.0
Cinergy Communications Company – 6.58%, due January 1, 2022 (d)	1.9			1.9
Debentures and notes, without collateral:
PAETEC 2018 Notes – 9.875%, due December 1, 2018 (c)	450.0			450.0
Premium on long-term debt, net	20.4			23.3
	8,820.6			8,651.7
Less current maturities	(92.5		)	(717.5		)
Total long-term debt	$	8,728.1		$	7,934.2


(a)	Subsequent to March 31, 2015, the debt obligation was retired in connection with completion of the debt-for-debt exchange (see Note 13).

(b)

On April 24, 2015, Windstream Services amended the revolving line of credit and extended its maturity to April 24, 2020. In connection with the debt-for-debt exchange, Windstream Services retired $752.2 million of borrowings outstanding under the revolving line of credit. Immediately following the completion of the spin-off, Windstream Services had borrowings outstanding under the amended revolving line of credit of approximately $277.8 million (see Note 13).


(c)	On April, 24, 2015, Windstream Services called for the redemption of these notes on May 27, 2015 (see Note 13).


(d)	Note was repaid on April 24, 2015 utilizing available borrowings under the amended revolving line of credit.

3. Long-term Debt and Lease Obligations, Continued:

Senior Secured Credit Facility

Revolving Line of Credit - During the first three months of 2015, Windstream Services borrowed $490.0 million under the revolving line of credit in its senior secured credit facility and repaid $295.0 million of these borrowings through March 31, 2015. Letters of credit are deducted in determining the total amount available for borrowing under the revolving line of credit. Accordingly, the total amount outstanding under the letters of credit and the indebtedness incurred under the revolving line of credit may not exceed $1,250.0 million. Considering letters of credit of $20.8 million, the amount available for borrowing under the revolving line of credit was $409.2 million at March 31, 2015.

During the first quarter of 2015, the variable interest rate on the revolving line of credit ranged from 2.41 percent to 4.50 percent, and the weighted average rate on amounts outstanding was 2.52 percent during the period. Comparatively, the variable interest rate ranged from 2.41 percent to 4.50 percent during the first three months of 2014, with a weighted average rate on amounts outstanding during the period of 2.53 percent.

Debt Compliance

The terms of Windstream Services’ credit facility and indentures include customary covenants that, among other things, require maintenance of certain financial ratios and restrict Windstream Services’ 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 Holding Corp. (“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 March 31, 2015, Windstream Services was in compliance with all of these covenants.

In addition, certain of Windstream Services’ debt agreements contain various covenants and restrictions specific to the subsidiary that is the legal counterparty to the agreement. Under Windstream Services’ 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 interest in Windstream Services, or breach of certain other conditions set forth in the borrowing agreements. Windstream Services and its subsidiaries were in compliance with these covenants as of March 31, 2015.

Maturities for long-term debt outstanding as of March 31, 2015, excluding $20.4 million of unamortized net premium, were as follows for each of the twelve month periods ended March 31:



Year	(Millions)
2016	$	912.5
2017	339.9
2018	1,306.9
2019	869.5
2020	1,820.1
Thereafter	3,551.3
Total	$	8,800.2

Capital Lease Obligations

We lease facilities, equipment and software for use in our operations. These facilities and equipment are included in outside communications plant in property, plant and equipment in the accompanying consolidated balance sheets. Lease agreements that include a bargain purchase option, transfer of ownership, contractual lease term equal to or greater than 75 percent of the remaining estimated economic life of the leased facilities or equipment or minimum lease payments equal to or greater than 90 percent of the fair value of the leased facilities or equipment are accounted for as capital leases in accordance with authoritative guidance for capital leases. These capital lease obligations are included in the accompanying consolidated balance sheets within other current liabilities and other liabilities. During the three month periods ended March 31, 2015 and 2014, we acquired assets under capital leases of $4.2 million and $5.1 million, respectively.

3. Long-term Debt and Lease Obligations, Continued:

Future minimum lease payments under capital lease obligations were as follows for each of the twelve month periods ended March 31:



Year	(Millions)
2016	$	31.9
2017	17.0
2018	2.1
2019	0.6
2020	0.6
Thereafter	1.7
Total future payments	53.9
Less: Amounts representing interest	3.8
Present value of minimum lease payments	$	50.1

Other Lease Obligations

During the third quarter of 2014, we contributed certain of our owned real property to the Windstream Pension Plan and then entered into agreements to leaseback the properties for continued use by our operating subsidiaries. Independent appraisals of the properties contributed were obtained and at the dates of contribution the properties’ aggregate fair value was $80.9 million. The lease agreements include 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.

Due to various forms of continuing involvement, including Windstream Services’ benefit from the future appreciation of the property, the transaction has been accounted for as a failed contribution-leaseback. Accordingly, the properties continue to be reported as assets of Windstream and depreciated over their remaining useful lives until termination of the lease agreement. We recorded a long-term lease obligation equal to the fair value of the properties at the date of contribution. No gain or loss was recognized on the contribution. As lease payments are made to the Windstream Pension Plan, a portion of the payment will be applied to the long-term lease obligation with the balance of the payment charged to interest expense using the effective interest method. At March 31, 2015 and December 31, 2014, the total lease obligation was $81.1 million and $81.0 million, respectively, and was included within other current liabilities and other liabilities in the accompanying consolidated balance sheet.

Future minimum payments during the initial terms of the leases were as follows for each of the twelve month periods ended March 31:



Year	(Millions)
2016	$	6.4
2017	6.6
2018	6.8
2019	6.9
2020	7.1
Thereafter	90.2
Total	$	124.0

3. Long-term Debt and Lease Obligations, Continued:

Interest Expense

Interest expense was as follows for the three month periods ended March 31:



	Three Months Ended
(Millions)	2015			2014
Interest expense related to long-term debt	$	133.6		$	134.5
Impact of interest rate swaps	6.6			7.4
Interest on capital and other lease obligations	2.4			1.1
Less capitalized interest expense	(1.5		)	(1.1		)
Total interest expense	$	141.1		$	141.9