Note 11 Debt

Revolving Credit Facilities

At December 31, 2015, TDS and U.S. Cellular had revolving credit facilities available for general corporate purposes. Amounts under the revolving credit facilities may be borrowed, repaid and reborrowed from time to time until maturity. U.S. Cellular borrowed and repaid cash amounts under its revolving credit facility in 2014. Neither TDS nor U.S. Cellular borrowed under their revolving credit facilities in 2015 or 2013 except for standby letters of credit.

In certain circumstances, TDS’ and U.S. Cellular’s interest cost on their revolving credit facilities may be subject to increase if their current credit ratings from nationally recognized credit rating agencies are lowered, and may be subject to decrease if the ratings are raised.

In 2014, certain nationally recognized credit rating agencies downgraded TDS and U.S. Cellular corporate and senior debt credit ratings. After these downgrades, TDS and U.S. Cellular are rated at sub-investment grade. As a result of these downgrades, the commitment fee on the revolving credit facilities increased to 0.30% per annum. The downgrades also increased the interest rate on any borrowings under the revolving credit facilities by 0.25% per annum. As of December 31, 2015, TDS' and U.S. Cellular's credit ratings from the nationally recognized credit rating agencies remained at sub-investment grade. The revolving credit facilities do not cease to be available nor do the maturity dates accelerate solely as a result of a downgrade in TDS’ or U.S. Cellular’s credit rating. However, downgrades in TDS’ or U.S. Cellular’s credit rating could adversely affect their ability to renew the revolving credit facilities or obtain access to other credit facilities in the future.

The maturity date of any borrowings under the TDS and U.S. Cellular revolving credit facilities would accelerate in the event of a change in control.

The continued availability of the revolving credit facilities requires TDS and U.S. Cellular to comply with certain negative and affirmative covenants, maintain certain financial ratios and make representations regarding certain matters at the time of each borrowing. TDS and U.S. Cellular believe they were in compliance as of December 31, 2015 with all covenants and other requirements set forth in the revolving credit facilities.

The following table summarizes the terms of such revolving credit facilities as of December 31, 2015:

			TDS			U.S. Cellular
(Dollars in millions)
Maximum borrowing capacity			$	400.0		$	300.0
Letters of credit outstanding			$	0.6		$	17.5
Amount borrowed			$	–		$	–
Amount available for use			$	399.4		$	282.5
Illustrative borrowing rate: One-month London Interbank Offered
	Rate ("LIBOR") plus contractual spread1			2.18	%		2.18	%
	Illustrative LIBOR Rate			0.43	%		0.43	%
	Contractual spread			1.75	%		1.75	%
Commitment fees on amount available for use2				0.30	%		0.30	%

Agreement date				Dec 2010			Dec 2010
Maturity date				Dec 2017			Dec 2017

Fees incurred attributable to the Revolving Credit Facility are as follows:
	Fees incurred as a percent of Maximum borrowing capacity for 2015			0.33	%		0.29	%
	Fees incurred, amount
		2015	$	1.3		$	0.9
		2014	$	0.9		$	3.0
		2013	$	0.9		$	0.8

1		Borrowings under the revolving credit facility bear interest at LIBOR plus a contractual spread based on TDS' or U.S. Cellular’s credit rating or, at TDS' or U.S. Cellular’s option, an alternate “Base Rate” as defined in the revolving credit agreement. TDS and U.S. Cellular may select a borrowing period of either one, two, three or six months (or other period of twelve months or less if requested by TDS or U.S. Cellular and approved by the lenders).

2		The revolving credit facility has commitment fees based on the unsecured senior debt ratings assigned to TDS and U.S. Cellular by certain ratings agencies.

In connection with U.S. Cellular’s revolving credit facility, TDS and U.S. Cellular entered into a subordination agreement dated December 17, 2010 together with the administrative agent for the lenders under U.S. Cellular’s revolving credit agreement. Pursuant to this subordination agreement, (a) any consolidated funded indebtedness from U.S. Cellular to TDS will be unsecured and (b) any (i) consolidated funded indebtedness from U.S. Cellular to TDS (other than “refinancing indebtedness” as defined in the subordination agreement) in excess of $105 million and (ii) refinancing indebtedness in excess of $250 million will be subordinated and made junior in right of payment to the prior payment in full of obligations to the lenders under U.S. Cellular’s revolving credit agreement. As of December 31, 2015, U.S. Cellular had no outstanding consolidated funded indebtedness or refinancing indebtedness that was subordinated to the revolving credit agreement pursuant to the subordination agreement.

In July 2014, TDS and U.S. Cellular entered into amendments to the revolving credit facilities agreements which increased the Consolidated Leverage Ratio (the ratio of Consolidated Funded Indebtedness to Consolidated Earnings before interest, taxes, depreciation and amortization) that the companies are required to maintain. Beginning July 1, 2014, TDS and U.S. Cellular are required to maintain the Consolidated Leverage Ratio at a level not to exceed 3.75 to 1.00 for the period of the four fiscal quarters most recently ended (this was 3.00 to 1.00 prior to July 1, 2014). The terms of the amendment decrease the maximum permitted Consolidated Leverage Ratio beginning January 1, 2016 from 3.75 to 3.50, with further decreases effective July 1, 2016 and January 1, 2017 (and will return to 3.00 to 1.00 at that time). For the twelve months ended December 31, 2015, the actual Consolidated Leverage Ratio was 2.25 to 1.00. Future changes in TDS’ and U.S. Cellular’s financial condition could negatively impact their ability to meet the financial covenants and requirements in their revolving credit facilities agreements. TDS also has certain other non-material credit facilities from time to time.

At December 31, 2015, TDS had recorded $3.6 million of issuance costs related to the revolving credit facilities which is included in Other assets and deferred charges in the Consolidated Balance Sheet.

Term Loan

In January 2015, U.S. Cellular entered into a senior term loan credit facility. In July 2015, U.S. Cellular borrowed the full amount of $225 million available under this facility in two separate draws. The interest rate on outstanding borrowings will be reset at three and six month intervals at a rate of LIBOR plus 250 basis points. This credit facility provides for the draws to be continued on a long-term basis under terms that are readily determinable. U.S. Cellular has the ability and intent to carry the debt for the duration of the agreement. Principal reductions will be due and payable in quarterly installments of $2.8 million beginning in March 2016 through December 2021, and the remaining unpaid balance will be due and payable in January 2022. This facility was entered into for general corporate purposes, including working capital, spectrum purchases and capital expenditures.

The continued availability of the term loan facility requires U.S. Cellular to comply with certain negative and affirmative covenants, maintain certain financial ratios and make representations regarding certain matters at the time of each borrowing, that are substantially the same as those in the U.S. Cellular revolving credit facility described above.

In connection with U.S. Cellular’s term loan credit facility, TDS and U.S. Cellular entered into a subordination agreement dated January 21, 2015 together with the administrative agent for the lenders under U.S. Cellular’s term loan credit agreement, which is substantially the same as the subordination agreement in the U.S. Cellular revolving credit facility described above. As of December 31, 2015, U.S. Cellular had no outstanding consolidated funded indebtedness or refinancing indebtedness that was subordinated to the term loan facility pursuant to this subordination agreement.

Other Long-Term Debt

In November 2015, U.S. Cellular issued $300 million of 7.25% Senior Notes due 2064, and received cash proceeds of $289.7 million after payment of debt issuance costs of $10.3 million. These funds will be used for general corporate purposes, including working capital, spectrum purchases and capital expenditures.

Long-term debt as of December 31, 2015 and 2014 was as follows:

								December 31,
								2015						2014
				Issuance date	Maturity date	Call date		Principal Amount		Less Unamortized discount and debt issuance costs		Total		Principal Amount		Less Unamortized discount and debt issuance costs	Total
(Dollars in thousands)
TDS:
		Unsecured Senior Notes
		6.625%		March 2005	March 2045	March 2010	$	116,250	$	3,567	$	112,683	$	116,250	$	3,604	$	112,646
		6.875%		Nov 2010	Nov 2059	Nov 2015		225,000		7,537		217,463		225,000		7,561		217,439
		7.000%		March 2011	March 2060	March 2016		300,000		9,621		290,379		300,000		9,650		290,350
		5.875%		Nov 2012	Dec 2061	Dec 2017		195,000		6,718		188,282		195,000		6,744		188,256
	Purchase contract			Oct 2001	Oct 2021			1,097		–		1,097		1,097		–		1,097
			Total Parent					837,347		27,443		809,904		837,347		27,559		809,788
Subsidiaries:
	U.S. Cellular -
		Unsecured Senior Notes
		6.700%		Dec 2003 and June 2004	Dec 2033	Dec 2003		544,000		15,247		528,753		544,000		15,656		528,344
		6.950%		May 2011	May 2060	May 2016		342,000		10,905		331,095		342,000		10,937		331,063
		7.250%		Dec 2014	Dec 2063	Dec 2019		275,000		9,629		265,371		275,000		9,644		265,356
		7.250%		Nov 2015	Nov 2064	Nov 2020		300,000		10,316		289,684		–		–		–
		Term Loan		Jan 2015	Jan 2022			225,000		2,283		222,717		–		–		–
		Obligation on capital leases						2,200		–		2,200		2,143		–		2,143
	TDS Telecom -
		Rural Utilities Service (“RUS”) and other notes						691				691		699				699
		Obligation on capital leases						733		–		733		767		–		767
	Other -
		Long-term notes			Through 2016			2,961		–		2,961		3,686		–		3,686
		Obligation on capital leases						24				24		31		–		31
			Total Subsidiaries					1,692,609		48,380		1,644,229		1,168,326		36,237		1,132,089
Total long-term debt							$	2,529,956	$	75,823	$	2,454,133	$	2,005,673	$	63,796	$	1,941,877
		Long-term debt, current									$	14,306					$	808
		Long-term debt, noncurrent									$	2,439,827					$	1,941,069

TDS may redeem its callable notes and U.S. Cellular may redeem its 6.95% Senior Notes, 7.25% 2063 Senior Notes and 7.25% 2064 Senior Notes, in whole or in part at any time after the respective call date, at a redemption price equal to 100% of the principal amount redeemed plus accrued and unpaid interest. U.S. Cellular may redeem the 6.7% Senior Notes, in whole or in part, at any time prior to maturity at a redemption price equal to the greater of (a) 100% of the principal amount of such notes, plus accrued and unpaid interest, or (b) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date on a semi-annual basis at the Treasury Rate plus 30 basis points.

Interest on the notes is payable quarterly on Senior Notes outstanding at December 31, 2015, with the exception of U.S. Cellular's 6.7% note in which interest is payable semi-annually.

The annual requirements for principal payments on long-term debt are approximately $14.3 million, $12.1 million, $11.4 million, $11.4 million and $11.4 million for the years 2016 through 2020, respectively.

The covenants associated with TDS and its subsidiaries’ long-term debt obligations, among other things, restrict TDS’ ability, subject to certain exclusions, to incur additional liens, enter into sale and leaseback transactions, and sell, consolidate or merge assets.

TDS’ long-term debt notes do not contain any provisions resulting in acceleration of the maturities of outstanding debt in the event of a change in TDS’ credit rating. However, a downgrade in TDS’ credit rating could adversely affect its ability to obtain long-term debt financing in the future.