Long-term Debt

12 Months Ended

Dec. 31, 2011

Long-term Debt [Abstract]

Long-term Debt

2. Long-term Debt

Long-term debt consists of the following (in thousands):

	December 31,
	2011		2010
Long-term debt including current portion:
Senior credit facility	$	471,968	$	467,791
10 1/ 2% senior secured second lien notes at liquidation value		365,000		365,000
Total long-term debt including current portion at liquidation value		836,968		832,791
Less unamortized discount on 10 1/2% senior secured second lien notes		(4,735)		(6,087)
Total long-term debt at recorded value	$	832,233	$	826,704
Borrowing availability under our senior credit facility	$	31,000	$	40,000

Long-term Debt

Our senior credit facility consists of a revolving loan, which matures March 19, 2014, and a term loan, which matures December 31, 2014. Excluding accrued interest, the amount outstanding under our senior credit facility as of December 31, 2011 was $472.0 million comprised of a term loan balance of $463.0 and a revolving loan balance of $9.0 million. Excluding accrued interest, the amount outstanding under our senior credit facility as of December 31, 2010 was comprised solely of a term loan balance of $467.8 million. Our maximum borrowing availability is limited by our required compliance with certain restrictive covenants, including a first lien net leverage ratio covenant.

As of December 31, 2011 and 2010, we had $365.0 million of our 10   ¹/2% senior secured second lien notes due 2015 (the “Notes”) outstanding. Our Notes mature on June 29, 2015.

As of December 31, 2011 and 2010, the interest rate on the balance outstanding under the senior credit facility was 3.8% and 4.5%, respectively. As of December 31, 2011 and 2010, the coupon interest rate and the yield on the Notes were 10.5% and 11.0%, respectively. The yield on the Notes exceeds the coupon interest rate because the Notes were issued with “original issue discount”.

As of December 31, 2011 and 2010, we had a deferred loan cost balance, net of accumulated amortization, of $4.0 million and $4.8 million, respectively, related to our senior credit facility. As of December 31, 2011 and 2010, we had a deferred loan cost balance, net of accumulated amortization, of $6.1 million and $7.5 million, respectively, related to our Notes.

Amendment to Senior Credit Facility in 2011

Effective June 30, 2011, we entered into the third amendment to our senior credit facility which provides for, among other things, our ability to use a portion of the proceeds from a potential issuance by us of certain capital stock and/or debt securities to redeem the outstanding shares of our Series D Perpetual Preferred Stock (including accrued dividends and any premiums), provided that we repay the term loans outstanding under the senior credit facility on not less than a dollar for dollar basis by the amount used to redeem such preferred stock, except to the extent that the redemption of the Series D Perpetual Preferred Stock is effectuated with the proceeds of an issuance of common equity securities. Any such preferred stock redemption must be completed within 40 days of the issuance of such securities or the proceeds therefrom will be required to be used to repay additional amounts of the loans outstanding under the senior credit facility. We completed the third amendment to our senior credit facility at a cost of approximately $0.5 million, which was funded from cash on hand. These costs were primarily capitalized as deferred financing costs and we are amortizing them over the term of our senior credit facility.

Amendment of Senior Credit Facility in 2010 (the “2010 Amendment”) and Issuance of Notes

Effective as of March 31, 2010, we amended our senior credit facility. The 2010 Amendment provided for, among other things: (i) an increase in the maximum total net leverage ratio covenant under the senior credit facility through March 30, 2011 and (ii) a potential issuance of capital stock and/or senior or subordinated debt securities, which could include securities with a second lien security interest (the “Replacement Debt”).

Pursuant to the 2010 Amendment, from March 31, 2010 and until the date we completed an offering of Replacement Debt resulting in the repayment of not less than $200.0 million of our term loan outstanding under the senior credit facility (which offering was completed with the issuance of the Notes on April 29, 2010), (i) we were required to pay an annual incentive fee equal to 2.0%, which fee was eliminated upon the consummation of such offering and repayment, (ii) the annual facility fee remained at 3.0%, and (iii) we remained subject to a maximum total net leverage ratio, which ratio, following such repayment, would be replaced by a first lien leverage test. In addition, from and after such repayment, we were required to comply with a minimum fixed charge coverage ratio of 0.90 to 1.0.

On April 29, 2010, we issued $365.0 million aggregate principal amount of Notes. The Notes constituted “Replacement Debt” under the senior credit facility. The Notes were priced at 98.085% of par, resulting in gross proceeds to the Company of $358.0 million. Interest began accruing on the Notes on April 29, 2010, and is payable semi-annually on May 1 and November 1 of each year. The first interest payment date was November 1, 2010. We may redeem some or all of the Notes at any time after November 1, 2012 at specified redemption prices. We may also redeem up to 35% of the aggregate principal amount of the Notes using the proceeds from certain equity offerings completed before November 1, 2012. In addition, we may redeem some or all of the Notes at any time prior to November 1, 2012 at a price equal to 100% of the principal amount thereof plus a make whole premium, and accrued and unpaid interest. If we sell certain of our assets or experience specific kinds of changes of control, we must offer to repurchase the Notes.

The Notes and the guarantees thereof are secured by a second priority lien on substantially all of the assets owned by Gray and its subsidiary guarantors, including, among other things, all present and future shares of capital stock, equipment, owned real property, leaseholds and fixtures, in each case subject to certain exceptions and customary permitted liens (the “Notes Collateral”). The Notes Collateral also secures obligations under our senior credit facility, subject to certain exceptions and permitted liens.

On April 29, 2010, we used a portion of the net proceeds from the sale of the Notes to repay $300.0 million in principal amount of our term loan outstanding under our senior credit facility, to repay interest thereon and to pay certain fees due thereunder. Following the repayment, our annual facility fee rate was reduced to 0.75% per year and we became subject to a maximum first lien leverage ratio covenant. Effective April 1, 2011, our annual facility fee rate became dependent upon our first lien leverage ratio and can range between 0% and 1.0% per year.

Beginning April 30, 2010, all interest and fees accrued under the senior credit facility became payable in cash upon their respective due dates, with no portion of such accrued interest and fees being subject to deferral.

In order to obtain the foregoing amendment of our senior credit facility, we incurred loan issuance costs of approximately $4.5 million, including legal and professional fees. We recorded a loss from early extinguishment of debt of $0.3 million for year ended December 31, 2010. In order to issue our Notes, we incurred issuance costs of approximately $8.6 million, including legal and professional fees.

A summary of certain significant terms contained in our senior credit facility is as follows:

Description	As of December 31, 2011
Annual interest rate on outstanding term loan balance (1)	LIBOR plus 3.50% or Base rate plus 2.50%
Annual interest rate on outstanding revolving loan balance (1)	LIBOR plus 3.50% or Base rate plus 2.50%
Annual facility fee rate (2)	0.0%
Annual commitment fee on undrawn revolving loan balance	0.50%
Revolving loan commitment	$40 million
Maximum first lien leverage ratio at December 31, 2011 and thereafter	6.50 to 1.00
Minimum fixed charge coverage ratio at December 31, 2011 and thereafter	1.00 to 1.00
Maximum cash balance that can be deducted from total debt to calculate net debt in the first lien leverage ratio test	$15.0 million

(1) LIBOR refers to the London Interbank Offered Rate and the Base rate is generally equal to the lender’s prime rate.

(2) If our first lien leverage ratio is greater than or equal to 6.00 to 1.00, our facility fee rate would be 1.0% per year. If our first lien leverage ratio is greater than or equal to 5.50 to 1.00 but less than 6.00 to 1.00, our facility fee rate would be 0.75% per year. If our first lien leverage ratio is greater than or equal to 5.00 to 1.00 but less than 5.50 to 1.00, our facility fee rate would be 0.50% per year. If our first lien leverage ratio is greater than or equal to 4.50 to 1.00 but less than 5.00 to 1.00, our facility fee rate would be 0.25% per year. If our first lien leverage ratio is less than 4.50 to 1.00, our facility fee rate would be 0.00% per year.

Amendment to Our Senior Credit Facility in 2009 (the “2009 Amendment”)

Effective as of March 31, 2009, we amended our senior credit facility. The 2009 Amendment included (i) an increase in the maximum total net leverage ratio covenant for the year ended December 31, 2009, (ii) a general increase in the restrictiveness of our remaining covenants and (iii) increased interest rates, as described below. In connection therewith, we incurred loan issuance costs of approximately $7.4 million, including legal and professional fees. These fees were funded from our existing cash balances. The 2009 Amendment was determined to be significant and, as a result, we recorded a loss from early extinguishment of debt of $8.4 million. The 2009 Amendment increased our annual cash interest rate by 2.0% and, beginning March 31, 2009, required the payment of a 3.0% annual facility fee.

Collateral, Covenants and Restrictions

The collateral for our debt obligations consists of substantially all of our and our subsidiaries’ assets. In addition, our subsidiaries are joint and several guarantors of the obligations and our ownership interests in our subsidiaries are pledged to collateralize the obligations. Our debt obligations contain affirmative and restrictive covenants. These covenants include but are not limited to (i) limitations on additional indebtedness, (ii) limitations on liens, (iii) limitations on amendments to our by-laws and articles of incorporation, (iv) limitations on mergers and the sale of assets, (v) limitations on guaranties, (vi) limitations on investments and acquisitions, (vii) limitations on the payment of dividends and the redemption of our capital stock, (vii) maintenance of a specified first lien leverage ratio not to exceed certain maximum limits and a fixed charge coverage ratio not to fall below certain minimum limits, (viii) limitations on related party transactions, (ix) limitations on the purchase of real estate, and (x) limitations on entering into multiemployer retirement plans, as well as other customary covenants for debt obligations of this type.

As of December 31, 2011 and 2010, we were in compliance with all covenants required under our debt obligations. In the future, if we are unable to maintain compliance with any of our covenants, we would use reasonable efforts to seek an amendment or waiver to such requirements. However, in such circumstances, we could provide no assurances that any amendment or waiver would be obtained nor of its terms. In the future, if we are not in compliance and we are unable to obtain any required waivers or amendments, we would be in default under those obligations and any such default could allow a majority of the affected creditors to demand an acceleration of the repayment of all outstanding amounts under the affected debt or to foreclose on the assets securing such indebtedness.

We are a holding company with no material independent assets or operations, other than our investments in our subsidiaries. The aggregate assets, liabilities, earnings and equity of the subsidiary guarantors as defined in our senior credit facility are substantially equivalent to our assets, liabilities, earnings and equity on a consolidated basis. The subsidiary guarantors are, directly or indirectly, our wholly-owned subsidiaries and the guarantees of the subsidiary guarantors are full, unconditional and joint and several. All of our current and future direct and indirect subsidiaries are and will be guarantors under the senior credit facility. Accordingly, separate financial statements and other disclosures of each of the subsidiary guarantors are not presented because we have no material independent assets or operations, the guarantees are full and unconditional and joint and several and any of our subsidiaries other than the subsidiary guarantors are immaterial.

Maturities

Aggregate minimum principal maturities on long-term debt as of December 31, 2011 were as follows (in thousands):

	Minimum Principal Maturities
Year	Senior Credit    Facility		Notes		Total
2012	$	4,823	$	-	$	4,823
2013		4,823		-		4,823
2014		462,322		-		462,322
2015		-		365,000		365,000
2016		-		-		-
Total	$	471,968	$	365,000	$	836,968

Interest Payments

For all of our interest bearing obligations, including derivative contracts, we made interest payments of approximately $57.4 million, $65.0 million and $46.8 million during 2011, 2010 and 2009, respectively. We did not capitalize any interest payments during the years ended December 31, 2011, 2010 or 2009.