Obligation UnitedHealth Group 8.25% ( US20341WAD74 ) en USD

UnitedHealth Group

100.02 % ⇌

Etats-unis

US20341WAD74 ( en USD )

8.25% par an ( paiement semestriel )

14/10/2023 - Obligation échue

Prospectus brochure de l'obligation UnitedHealth Group US20341WAD74 en USD 8.25%, échue

2 000 USD

1 110 000 000 USD

20341WAD7

CCC ( Ultra spéculatif )

Caa2 ( Ultra spéculatif )

L'Obligation émise par UnitedHealth Group ( Etats-unis ) , en USD, avec le code ISIN US20341WAD74, paye un coupon de 8.25% par an.
Le paiement des coupons est semestriel et la maturité de l'Obligation est le 14/10/2023

L'Obligation émise par UnitedHealth Group ( Etats-unis ) , en USD, avec le code ISIN US20341WAD74, a été notée Caa2 ( Ultra spéculatif ) par l'agence de notation Moody's.

L'Obligation émise par UnitedHealth Group ( Etats-unis ) , en USD, avec le code ISIN US20341WAD74, a été notée CCC ( Ultra spéculatif ) par l'agence de notation Standard & Poor's ( S&P ).

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TABLE OF CONTENTS
INDEX TO HISTORICAL FINANCIAL STATEMENTS
Table of Contents
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-205450
COMMUNICATIONS SALES & LEASING, INC.
CSL CAPITAL, LLC
Offer to Exchange
$1,110,000,000 aggregate principal amount of 8.25% Senior Notes due 2023
for
$1,110,000,000 aggregate principal amount of 8.25% Senior Notes due 2023
that have been registered under the Securities Act of 1933, as amended
The exchange offer will expire at 5:00 p.m.,
New York City time, on September 2, 2015, unless earlier terminated or extended.
Communications Sales & Leasing, Inc. and CSL Capital, LLC hereby, jointly offer, upon the terms and subject to the conditions set forth in this
prospectus (which constitute the "exchange offer"), to exchange up to $1,110,000,000 aggregate principal amount of their registered 8.25% Senior
Notes due 2023, which we refer to as the "exchange notes," for a like principal amount of certain of their outstanding 8.25% Senior Notes due 2023,
which we refer to as the "original notes." Unless the context otherwise requires, the term "note" or "notes" in this prospectus refer collectively to the
original notes and the exchange notes. The "original notes" consist of $1,110,000,000 aggregate principal amount of 8.25% Senior Notes due 2023
issued on April 24, 2015. The terms of the exchange offer are summarized below and are more fully described in this prospectus.
The terms of the exchange notes are substantially identical to the terms of the original notes in all material respects, except that the exchange notes
are registered under the Securities Act of 1933, as amended (the "Securities Act"), and the transfer restrictions, registration rights and additional interest
provisions applicable to the original notes do not apply to the exchange notes.
Communications Sales & Leasing, Inc. and CSL Capital, LLC will accept for exchange any and all original notes validly tendered and not
withdrawn prior to 5:00 p.m., New York City time, on September 2, 2015, unless earlier terminated or extended.
You may withdraw tenders of original notes at any time prior to the expiration of the exchange offer.
Neither Communications Sales & Leasing, Inc., CSL Capital, LLC nor any of the subsidiary guarantors will receive any proceeds from the
exchange offer.
The exchange of original notes for exchange notes generally will not be a taxable event for U.S. federal income tax purposes.
The exchange notes will be fully and unconditionally guaranteed on a senior basis by the subsidiaries of Communications Sales & Leasing, Inc. that
currently guarantee Communications Sales & Leasing, Inc.'s senior secured credit facilities.
Communications Sales & Leasing, Inc. does not intend to apply for listing of the notes on any securities exchange or for inclusion of the notes in
any automated quotation system.
You should consider carefully the "Risk Factors" beginning on page 22 of this prospectus before participating in the exchange offer.
We are making the exchange offer described in this prospectus in reliance on the position of the staff of the Securities and Exchange Commission
("SEC") set forth in the Exxon Capital Holdings Corp., SEC no-action letter (April 13, 1988), Morgan, Stanley & Co. Inc., SEC no-action letter
(June 5, 1991), Shearman & Sterling, SEC no-action letter (July 2, 1993), and similar no action letters issued to third parties.
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Each broker-dealer that receives exchange notes for its own account in the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of those exchange notes. By so acknowledging and delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange
notes received in exchange for original notes where the original notes were acquired by the broker-dealer as a result of market-making activities or other
trading activities.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the exchange notes
to be distributed in the exchange offer or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is August 5, 2015.
Table of Contents
TABLE OF CONTENTS
NOTICE TO NEW HAMPSHIRE RESIDENTS

ii
MARKET AND INDUSTRY DATA

ii
WHERE YOU CAN FIND MORE INFORMATION

ii
FINANCIAL INFORMATION

iii
NON-GAAP FINANCIAL MEASURES

iii
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

v
PROSPECTUS SUMMARY

1
SUMMARY OF THE EXCHANGE OFFER

11
SUMMARY OF THE TERMS OF THE EXCHANGE NOTES

15
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL

DATA

18
RISK FACTORS

22
USE OF PROCEEDS

39
RATIO OF EARNINGS TO FIXED CHARGES OF CS&L

39
SELECTED COMBINED HISTORICAL FINANCIAL DATA

40
SELECTED QUARTERLY FINANCIAL DATA OF THE CONSUMER CLEC BUSINESS

40
THE SPIN-OFF AND RELATED TRANSACTIONS

41
CS&L'S UNAUDITED PRO FORMA COMBINED FINANCIAL DATA

42
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

50
BUSINESS

61
OUR CURRENT RELATIONSHIP WITH WINDSTREAM

74
MANAGEMENT

84
EXECUTIVE COMPENSATION

90
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
107
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
108
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES
109
DESCRIPTION OF OTHER INDEBTEDNESS
112
THE EXCHANGE OFFER
115
DESCRIPTION OF THE EXCHANGE NOTES
122
CERTAIN MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
180
PLAN OF DISTRIBUTION
181
LEGAL MATTERS
182
EXPERTS
182
INDEX TO HISTORICAL FINANCIAL STATEMENTS
F-1
The information contained in this prospectus speaks only as of the date of this prospectus unless the information specifically indicates that
another date applies. No dealer, salesperson or other person has been authorized to give any information or to make any representations other
than those contained in this prospectus in connection with the offer contained herein and, if given or made, such information or representations
must not be relied upon as having been authorized by us. Neither the delivery of this prospectus nor any sale made hereunder shall under any
circumstances create an implication that there has been no change in our affairs or that of our subsidiaries since the date hereof.
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This prospectus contains summaries of the material terms of certain documents. Copies of these documents, except for certain exhibits and
schedules, will be made available to you without charge upon written or oral request to us. Requests for documents or other additional
information should be directed to Communications Sales & Leasing, Inc., by mail at 10802 Executive Center Drive, Benton Building Suite 300,
Little Rock, Arkansas 72211, attention Daniel L. Heard, Senior Vice
i
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President--General Counsel and Secretary, or by phone at (501) 850-0820. To obtain timely delivery of documents or information, we must
receive your request no later than five (5) business days before the expiration date of the exchange offer.
The exchange notes initially will be represented by permanent global certificates in fully registered form without coupons and will be deposited
with a custodian for, and registered in the name of, a nominee of The Depository Trust Company, New York, New York, or DTC, as depositary.
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED
UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES ANNOTATED, 1955, AS AMENDED, WITH THE STATE
OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE
STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED
UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN
EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF
STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL
TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY
PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF
THIS PARAGRAPH.
MARKET AND INDUSTRY DATA
This prospectus contains or incorporates by reference industry, market and competitive position data and forecasts that are based on industry
publications and studies conducted by third parties. Although the industry publications and third-party studies generally state that the information that
they contain has been obtained from sources believed to be reliable, they do not guarantee the accuracy or completeness of such information, and we
have not independently verified any of the data from third-party sources or ascertained the underlying economic assumptions relied upon therein. While
we believe that the market position, market opportunity and market size information included in this prospectus is generally reliable, such information
is inherently imprecise. The industry forward-looking statements included in this prospectus may be materially different than actual results.
WHERE YOU CAN FIND MORE INFORMATION
We maintain a website at www.cslreit.com. Information contained on, or accessible through, our website is not incorporated by reference into and
does not constitute a part of this prospectus or any other report or documents we file with or furnish to the Securities and Exchange Commission (the
"SEC").
We are subject to the information and reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance with the Exchange Act, we will file periodic reports, proxy statements and other information with the SEC, which will be available on the
Internet website maintained by the SEC at www.sec.gov and at the SEC's public reference facilities referred to below.
We have filed with the SEC a Registration Statement on Form S-4, of which this prospectus is a part, under the U.S. Securities Act of 1933, as
amended (the "Securities Act"), in connection with the exchange offer to which this prospectus relates. This prospectus does not contain all of the
information set forth in the registration statement and exhibits and schedules thereto. For further information with respect to our company and the
exchange offer, reference is made to the registration statement,
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including the exhibits and schedules thereto. Statements contained in this prospectus as to the contents of any contract or other document referred to in
this prospectus are not necessarily complete and, where that contract or other document has been filed as an exhibit to the registration statement, each
statement in this prospectus is qualified in all respects by the exhibit to which the reference relates. Copies of the registration statement, including the
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exhibits and schedules thereto, may be examined without charge at the public reference room of the SEC, 100 F Street, N.E., Washington, D.C. 20549.
Information about the operation of the public reference room may be obtained by calling the SEC at 1-800-SEC-0300. Copies of all or a portion of the
registration statement can be obtained from the public reference room of the SEC upon payment of prescribed fees. Our SEC filings, including our
registration statement, are also available to you, free of charge, on the SEC's website, www.sec.gov.
FINANCIAL INFORMATION
Prior to April 24, 2015, Communications Sales & Leasing, Inc., or CS&L, was a wholly owned subsidiary of Windstream Services, LLC
("Windstream Services"), which is a wholly-owned subsidiary of Windstream Holdings, Inc. ("Windstream Holdings"). On April 24, 2015, Windstream
Services contributed certain telecommunications network assets, including fiber and copper networks and other real estate and a small consumer
competitive local exchange carrier ("CLEC") business to CS&L in exchange for cash, shares of common stock of CS&L and certain indebtedness of
CS&L. Windstream Services distributed approximately 80.4% of the outstanding common stock of CS&L that it received to Windstream Holdings, and
Windstream Holdings distributed such shares to its existing stockholders in a tax-free spin-off (the "Spin-Off"). Windstream Holdings' stockholders
received one share of CS&L common stock for every five shares of Windstream Holdings common stock held at the close of business on April 10,
2015, the record date for the Spin-Off. The Spin-Off was effective from and after April 24, 2015.
This prospectus includes historical financial statements and information that reflect, for all periods presented, the historical financial position,
results of operations and cash flows of the distribution systems assets and the consumer CLEC business that Windstream contributed to CS&L
immediately prior to the Spin-Off. These historical financial statements have been prepared on a "carve-out" basis from Windstream Holdings'
consolidated financial statements using the historical results of operations, cash flows, assets and liabilities attributable to such distribution systems and
consumer CLEC business, and include allocations of income, expenses, assets and liabilities from Windstream Holdings. These allocations reflect
significant assumptions. Although CS&L's management believes such assumptions are reasonable, the historical financial statements do not fully reflect
what CS&L's financial position, results of operations and cash flows would have been had it been a stand-alone company during the periods presented.
In addition, although we include in this prospectus pro forma financial information giving effect to the Spin-Off and related transactions as described
under "CS&L's Unaudited Pro Forma Combined Financial Data," this information is presented for illustrative purposes and is based on assumptions,
some of which may not materialize, and actual results reported in periods following the Spin-Off may differ significantly from those reflected in the pro
forma financial information for a number of reasons. Accordingly, the historical financial information and our pro forma financial information included
in this prospectus should not be relied upon as being indicative of future results.
NON-GAAP FINANCIAL MEASURES
We refer to EBITDA, Net EBITDA, Funds From Operations, or "FFO" (as defined by the National Association of Real Estate Investment Trusts
("NAREIT")), and Adjusted Funds From Operations, or "AFFO," in this prospectus, which are not required by, or presented in accordance with,
accounting principles generally accepted in the United States ("GAAP"). While we believe that net income, as defined by GAAP, is the most
appropriate earnings measure, we also believe that EBITDA,
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Net EBITDA, FFO and AFFO are important non-GAAP supplemental measures of operating performance for a real estate investment trust ("REIT").
We define "EBITDA" as net income, as defined by GAAP, before interest expense, provision for income taxes and depreciation and amortization.
We define "Net EBITDA" as EBITDA less an amount of estimated general and administrative expenses that we expect to incur following the Spin-Off.
We believe EBITDA and Net EBITDA are important supplemental measures to net income because they provide additional information to evaluate our
operating performance on an unleveraged basis. Since EBITDA and Net EBITDA are not measures calculated in accordance with GAAP, they should
not be considered as an alternative to net income determined in accordance with GAAP.
Because the historical cost accounting convention used for real estate assets requires the recognition of depreciation expense except on land, such
accounting presentation implies that the value of real estate assets diminishes predictably over time. However, since real estate values have historically
risen or fallen with market and other conditions, presentations of operating results for a REIT that uses historical cost accounting for depreciation could
be less informative. Thus, NAREIT created FFO as a supplemental measure of operating performance for REITs that excludes historical cost
depreciation and amortization, among other items, from net income, as defined by GAAP. FFO is defined by NAREIT as net income computed in
accordance with GAAP, excluding gains or losses from real estate dispositions, plus real estate depreciation and amortization and impairment charges.
We compute FFO in accordance with NAREIT's definition. We define AFFO as FFO excluding (i) noncash revenues and expenses such as stock-based
compensation expense, amortization of debt discounts, amortization of deferred financing costs, amortization of intangible assets, and straight-line
rental revenue and (ii) the impact, which may be recurring in nature, of the following items: acquisition and transaction related expenses, the write off of
unamortized deferred financing costs, costs incurred as a result of the early repayment of debt, changes in the fair value of contingent consideration and
financial instruments, and other similar items. We believe that the use of FFO and AFFO, combined with the required GAAP presentations, improves
the understanding of operating results of REITs among investors and makes comparisons of operating results among such companies more meaningful.
We consider FFO and AFFO to be useful measures for reviewing comparative operating and financial performance. In particular, we believe AFFO, by
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excluding certain revenue and expense items, can help investors compare our operating performance between periods and to other REITs on a consistent
basis without having to account for differences caused by unanticipated items and events, such as acquisition and transaction related costs. While FFO
and AFFO are relevant and widely used measures of operating performance of REITs, they do not represent cash flows from operations or net income as
defined by GAAP and should not be considered an alternative to those measures in evaluating our liquidity or operating performance. FFO and AFFO
do not purport to be indicative of cash available to fund our future cash requirements.
Further, our computations of EBITDA, Net EBITDA, FFO and AFFO may not be comparable to that reported by other REITs or companies that do
not define FFO in accordance with the current NAREIT definition or that interpret the current NAREIT definition or define EBITDA, Net EBITDA and
AFFO differently than we do.
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The following table reconciles our calculations of EBITDA and Net EBITDA to pro forma net income, the most directly comparable GAAP
financial measure, for the year ended December 31, 2014 and the three months ended March 31, 2015:
Three Months
Year Ended
Ended

December 31, 2014

March 31, 2015

(unaudited in millions)

Net income
$
67.0 $
17.0
Interest expense

259.9
64.4
Income tax

3.1
0.6
Depreciation

343.1
85.8
Amortization

4.6
1.0
?
?
?
?
?
?
?
?
EBITDA
$
677.7 $
168.8
Estimated general and administrative expenses

(25.0)
(6.3)
?
?
?
?
?
?
?
?
Net EBITDA
$
652.7 $
162.5
?
?
?
?
?
?
?
?
The following table reconciles our calculations of FFO and AFFO to pro forma net income, the most directly comparable GAAP financial measure,
for the year ended December 31, 2014 and the three months ended March 31, 2015:
Three Months
Year Ended
Ended

December 31, 2014

March 31, 2015

(unaudited; in millions)

Net Income
$
67.0 $
17.0
Real estate depreciation and amortization

343.1
85.8
?
?
?
?
?
?
?
?
FFO

410.1
102.8
Stock-based compensation

--
--
Amortization of customer list intangibles

4.6
1.0
Amortization of debt discounts and deferred financing costs

14.7
3.8
Straight-line rental revenue

(17.2)
(4.3)
?
?
?
?
?
?
?
?
AFFO
$
412.2 $
103.3
?
?
?
?
?
?
?
?
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this prospectus are, or may be deemed to be, "forward-looking statements." Forward-looking statements include all
statements that are not historical statements of fact and those regarding our intent, belief or expectations, including, but not limited to, statements
regarding: future financing plans, business strategies, growth prospects and operating and financial performance; the effective priority of rents paid to
us; expectations regarding the making of distributions and the payment of dividends; and compliance with and changes in governmental regulations.
Words such as "anticipate(s)," "expect(s)," "intend(s)," "plan(s)," "believe(s)," "may," "will," "would," "could," "should," "seek(s)" and similar
expressions, or the negative of these terms, are intended to identify such forward-looking statements. These statements are based on management's
current expectations and beliefs and are subject to a number of risks and uncertainties that could lead to actual results differing materially from those
projected, forecasted or expected. Although we believe that the assumptions underlying the forward-looking statements are reasonable, we can give no
assurance that our expectations will be attained. Factors which could have a material adverse effect on
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our operations and future prospects or which could cause actual results to differ materially from our expectations include, but are not limited to:
·
our ability to achieve some or all the benefits that we expect to achieve from the Spin-Off;
·
the ability and willingness of Windstream and future customers to meet and/or perform their obligations under any contractual
arrangements that were entered into with us, including master lease arrangements, and any of their obligations to indemnify, defend and
hold us harmless from and against various claims, litigation and liabilities;
·
the ability of Windstream and future customers to comply with laws, rules and regulations in the operation of the assets we lease to
them;
·
the ability and willingness of Windstream and our future customers to renew their leases with us upon their expiration, and the ability to
reposition our properties on the same or better terms in the event of nonrenewal or in the event we replace an existing tenant, and
obligations, including indemnification obligations, we may incur in connection with the replacement of an existing tenant;
·
the availability of and our ability to identify suitable acquisition opportunities and our ability to acquire and lease the respective
properties on favorable terms;
·
our ability to generate sufficient cash flows to service our outstanding indebtedness;
·
access to debt and equity capital markets;
·
credit rating downgrades;
·
fluctuating interest rates;
·
our ability to retain our key management personnel;
·
our ability to qualify or maintain our status as a REIT;
·
changes in the U.S. tax law and other state, federal or local laws, whether or not specific to REITs;
·
covenants in our debt agreements that may limit our operational flexibility;
·
other risks inherent in the communications industry and in the ownership of communications distribution systems, including potential
liability relating to environmental matters and illiquidity of real estate investments; and
·
additional factors discussed in the sections entitled "Business," "Risk Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in this prospectus.
We caution holders of the original notes that the foregoing list of important factors may not contain all of the factors that are important to
prospective holders of the exchange notes. Forward-looking statements speak only as of the date of this prospectus. Except in the normal course of our
public disclosure obligations, we expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements to
reflect any change in our expectations or any change in events, conditions or circumstances on which any statement is based.
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PROSPECTUS SUMMARY
This summary highlights selected information included in this prospectus. It may not contain all information that may be important to you and is
qualified in its entirety by the more detailed information and financial statements included in this prospectus. You should read this prospectus in its
entirety, including the information set forth under the heading "Risk Factors" in this prospectus, before making an investment decision. In addition,
certain statements include forward-looking information that involves risks and uncertainties. See "Cautionary Statement Regarding Forward-Looking
Statements."
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Unless otherwise indicated or required by the context, references in this prospectus to the "Company," "CS&L," "we," "us," and "our" are to
Communications Sales & Leasing, Inc. together with its consolidated subsidiaries, and references to "Windstream" refer to Windstream Holdings, Inc.
and its consolidated subsidiaries.
Communications Sales & Leasing, Inc.
CS&L, an independent, publicly traded REIT, is engaged in the ownership, acquisition, leasing, and funding the construction of communication
distribution systems (CS&L intends to elect to be taxed as a REIT for U.S. federal income tax purposes starting with its taxable year ending
December 31, 2015). CS&L generates revenues primarily by leasing communications distribution systems to telecommunications operators in triple-net
lease arrangements, under which the tenant is primarily responsible for costs relating to the distribution systems (including property taxes, insurance,
and maintenance and repair costs). To our knowledge, CS&L is the first and only REIT primarily focused on acquiring and funding the construction of
communication distribution systems to lease to telecommunications operators. We believe this provides us with a significant first mover advantage to
capitalize on the large and fragmented telecom infrastructure industry. Additionally, our long-term lease structure provides us a highly predictable and
steady cash flow.
CS&L expects to grow and diversify its portfolio and tenant base by pursuing a range of transaction structures with communication service
providers, including, (i) Sale Leaseback Transactions, whereby we acquire existing distribution systems from communication service providers and
lease these assets back on a long-term triple net basis; (ii) Capital Investment Financing, whereby we offer communication service providers a cost
efficient method of raising funds for discrete capital investments to upgrade or expand their network; (iii) Mergers and Acquisitions Financing, whereby
we facilitate mergers and acquisition ("M&A") transactions as a capital partner; and (iv) Whole Company Acquisitions, which may include the use of
one or more taxable REIT subsidiaries (each, a "TRS"), which are permitted under the tax laws to acquire non-REIT operating businesses and assets.
CS&L has the flexibility to create tax-efficient, tailored solutions for communication service providers seeking to monetize their communication
distribution assets, to fund investment in their communication distribution infrastructure or to fund acquisitions in the communication service sector.
Additionally, we believe our existing liquidity and REIT structure will provide us with access to capital at attractive costs to pursue these transactions.
Prior to April 24, 2015, CS&L was a subsidiary of Windstream Holdings, Inc. ("Windstream Holdings"). On April 24, 2015, Windstream
contributed certain telecommunications network assets to CS&L and subsequently distributed approximately 80.4% of the total outstanding common
stock of CS&L to existing stockholders of Windstream Holdings in a tax-free spin-off. As a result, CS&L and its subsidiaries own approximately
64,300 fiber network route miles, representing approximately 3.5 million fiber strand miles, approximately 235,200 route miles of copper cable lines,
central office land and buildings across 29 states and beneficial rights to permits, pole agreements and easements that were previously owned by
Windstream Holdings (collectively, together with certain other rights, title and interests, the "Distribution Systems"). The Distribution Systems are
leased to Windstream Holdings on a triple-net basis pursuant to a long-term exclusive lease agreement (the "Master Lease"). Additionally,

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CS&L operates a small consumer competitive local exchange carrier ("CLEC") business (the "Consumer CLEC Business").
Business
Currently, our primary source of revenue is rental revenues from leasing our Distribution Systems to Windstream Holdings pursuant to the Master
Lease. Under the Master Lease, Windstream Holdings is primarily responsible for the costs related to operating the Distribution Systems, including
property taxes, insurance, and maintenance and repair costs. The Master Lease has an initial term of 15 years with four (4) five-year renewal options
and encompasses 29 states. The rent for the initial term is an annual fixed amount of $650 million during the first three years of the Master Lease.
Commencing with the fourth year of the Master Lease and continuing for the remainder of the initial term, rent under the Master Lease is subject to
annual escalation of 0.5%. Each five-year renewal option will provide Windstream Holdings the opportunity to renew any or all of the market areas,
which it will be required to do in the event it wishes to continue operations with the Distribution Systems in these markets.
Capital expenditures for the Distribution Systems leased under the Master Lease are generally the responsibility of Windstream Holdings. The
Master Lease stipulates that Windstream Holdings can request that we fund $50 million of capital expenditures per year for five years ($250 million in
total). At our discretion we can elect to make or not to make the requested capital expenditures. If we elect to fund the requested capital expenditures,
the annual lease payments will be increased by 8.125% of the capital expenditures funded by us during the first two years and at a floating rate based on
our cost of capital thereafter. Additionally, if we agree to fund the entire $250 million, the initial term of the Master Lease will be increased from
15 years to 20 years and the number of renewal terms will be reduced from four renewal terms of five years each to three renewal terms of five years
each. Monthly rent paid by Windstream Holdings will increase in accordance with the Master Lease effective as of the date of the funding.
Separate from the above capital expenditure funding option, Windstream Holdings has requested, and we have agreed, to fund up to $50 million of
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capital expenditures during the remainder of 2015. If fully completed and funded, these capital expenditures would increase rent from Windstream
Holdings by $4.06 million on an annualized basis, per the terms of the Master Lease.
Our Master Lease with Windstream Holdings provides us with highly stable and predictable cash flow and the optional capital expenditures
arrangement provides us an incremental growth opportunity to increase our rental revenues.
Our Portfolio / Properties
CS&L and its subsidiaries own approximately 64,300 fiber network route miles, representing approximately 3.5 million fiber strand miles,
approximately 235,200 route miles of copper cable lines, central office land and buildings across 29 states and beneficial rights to permits, pole
agreements and easements. Below is the summary of the fiber and copper assets that are leased to Windstream

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Holdings pursuant to the Master Lease, as well as a map showing the geographic distribution of such assets by fiber and copper mileage:
Network Route Miles(1)
% of
State

Fiber

Copper

Total

Total
GA

8,500
45,400
53,900
18%
TX

7,800
40,400
48,200
16%
IA

8,200
33,100
41,300
14%
KY

7,700
32,100
39,800
13%
NC

3,800
18,400
22,200
7%
AR

3,100
13,000
16,100
5%
OH

3,400
11,500
14,900
5%
OK

1,600
12,400
14,000
5%
MO

900
10,800
11,700
4%
FL

1,300
8,500
9,800
3%
NM

800
5,300
6,100
2%
IL

4,000
--
4,000
1%
AL

600
2,400
3,000
1%
IN

3,000
--
3,000
1%
MI

2,400
--
2,400
1%
WI

2,200
--
2,200
1%
Other

5,000
1,900
6,900
2%
?
?
?
?
?
?
?
?
?
?
?
?
?
?
64,300 235,200 299,500 100%
(1)
Windstream transferred approximately 87% of its fiber and approximately 82% of its copper, by net book value, to
CS&L.

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Geographic Distribution of Assets by Route Miles
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In addition, Windstream Holdings leases telephone poles and other assets from the Company under the Master Lease.
TRS Properties
We conduct the Consumer CLEC Business through Talk America Services, LLC, an indirect, wholly-owned subsidiary of CS&L ("Talk
America"). Talk America provides local telephone, high-speed Internet and long distance service to approximately 53,000 customers principally located
in 17 states across the eastern and central United States. Talk America generated approximately $36.0 million of revenue in 2014 (although its revenue
is expected to decline significantly each year due to competitive pressures) and approximately $7.9 million of revenue during the first quarter of fiscal
2015.
CS&L and Talk America have jointly elected for Talk America to be treated as a TRS for federal income tax purposes. As a TRS, Talk America
generally may provide services and engage in activities that we may not engage in directly without adversely affecting our qualification as a REIT.
Under current Internal Revenue Service (the "IRS") rules, up to 25% of CS&L's total assets may be in the form of TRS securities. As such, the TRS
currently gives us the capacity to acquire over $1.5 billion in non-REIT assets by way of whole company acquisitions or otherwise, providing us the
flexibility to operate the newly acquired business, sell the entire business or sell only the operations of the business and lease the network assets to an
operator.
Industry
To our knowledge, CS&L is the first and only REIT primarily focused on acquiring and funding the construction of communication distribution
systems to lease to communication service providers on a triple-net basis. We believe we will benefit from this first mover competitive advantage as we
seek to grow and diversify our portfolio and tenant base.

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We believe that we are well positioned to take advantage of the favorable Internet, data, and wireless growth trends driving the ongoing demand for
bandwidth infrastructure, and to be an active participant in the consolidation of the telecommunications industry. The growth of cloud-based computing,
video, mobile and social media applications, machine-to-machine connectivity, and other bandwidth-intensive applications, continues to drive rapidly
increasing consumption of bandwidth on a global basis. This growth in consumption requires the support of a robust communications infrastructure.
Fiber networks are a critical component of the overall communications infrastructure connecting data centers, cellular towers, and other carrier and
private networks. We believe that as telecom operators choose to focus on their business operations to capitalize on these trends, CS&L can provide
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such telecom operators with an opportunity to outsource the funding of the build out and/or acquisition of infrastructure at an attractive cost of capital,
on a long-term, passive basis.
CS&L benefits from a large universe of potential existing operator counterparties, which provides us with the opportunity to:
·
Acquire additional communication service assets through sale leaseback transactions or other transactions: There are approximately
133 million copper / coaxial connections in the United States, according to a 2013 FCC report, and approximately 186 million fiber
route miles worldwide. CS&L currently represents less than 2% of these markets.
·
Provide cost-efficient passive funding to telecom providers for network investment or M&A activity: Public telecom companies'
aggregate spend on capital expenditures in 2014 was $62 billion according to S&P Capital IQ. In addition, annual fiber investment was
approximately $15 billion from 2006 to 2011 as reported by industry research firm CRU Group. Furthermore, announced U.S. telecom
M&A activity was $71 billion between May 1, 2014 and May 27, 2015 according to ThomsonOne.
CS&L believes it has a large universe of potential partners in the fragmented telecom industry. These providers include:
·
Fiber and Copper Network Providers: There are over 2,000 independent small companies that may seek to build fiber and copper
networks to capitalize on the wireless backhaul and broadband demand.
·
Incumbent and Rural Local Exchange Carriers ("ILEC" and "RLEC"): Wireline providers that have a large copper network, with
millions of access lines, that require upgrades to remain competitive in the market.
·
Cable Operators: Cable operators who are seeking to invest in their coaxial cable network to deliver faster broadband speeds and
pursue opportunities in the enterprise and small-to-medium sized business markets.
·
Other Partners: Non-traditional buyers of communication networks looking to capitalize on the large growth in demand for data
bandwidth.
Business and Growth Strategy
Our primary goal is to create long-term shareholder value by (i) generating reliable and growing cash flows, (ii) diversifying our tenant and asset
base, (iii) paying a consistent dividend, and (iv) maintaining our financial strength and liquidity. To achieve this goal, we plan to employ a business
strategy that leverages our first mover advantage in the sector and our strong access to the capital markets. We intend to pursue investment
opportunities that meet our investing and financing objectives

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where we can earn attractive risk-adjusted rates of return. The key components of our business strategy include:
Acquire Additional Distribution Systems Through Sale Leaseback Transactions
We are actively seeking to acquire distribution systems from communication service providers and lease these assets back to the communication
service providers on a long-term triple-net basis. We believe this type of transaction benefits the communication service providers with incremental
liquidity which can be used to reduce indebtedness or for other investment, while they continue to focus on their existing business. Additionally, this
transaction structure is well established and extensively used in other sectors, including between wireless carriers and tower operators. We will employ
a disciplined, opportunistic acquisition strategy and seek to price transactions appropriately based on, among other things, growth opportunities, the mix
of assets acquired, length and terms of the lease, and credit worthiness of the tenant.
Fund Capital Extensions and Improvements of Distribution Systems For Existing and New Tenants
We believe the communications infrastructure industry in the U.S. is currently going through an upgrade cycle driven by the consumer's general
desire for greater bandwidth. These upgrades require significant capital expenditures, and we believe CS&L provides an attractive, non-competitive
funding source for communication service providers to help accelerate the expansion of their networks at an attractive cost of capital.
We intend to support our tenant operators and other communication service providers by providing capital to them for a variety of purposes,
including capacity augmentation projects and network expansions. We expect to structure these investments as lease arrangements that produce
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