America Online 2015 Annual Report Download - page 60

During March 2014, we issued $4.5billion aggregate principal
amount of fixed and floating rate notes resulting in cash proceeds
of approximately $4.5billion, net of discounts and issuance costs.
The issuances consisted of the following: $0.5billion aggregate
principal amount Floating Rate Notes due 2019 that bear interest
at a rate equal to three-month LIBOR plus 0.77% which rate will be
reset quarterly, $0.5billion aggregate principal amount of 2.55% Notes
due 2019, $1.0billion aggregate principal amount of 3.45% Notes due
2021, $1.25billion aggregate principal amount of 4.15% Notes due 2024
and $1.25billion aggregate principal amount of 5.05% Notes due
2034. During March 2014, the net proceeds were used to purchase
notes in the Tender Offer described below.
Also, during March 2014, $1.0billion of LIBOR plus 0.61%
Verizon Communications Notes and $1.5billion of 1.95% Verizon
Communications Notes matured and were repaid.
During September 2014, we issued $0.9billion aggregate principal
amount of 4.8% Notes due 2044. The issuance of these Notes resulted
in cash proceeds of approximately $0.9billion, net of discounts and
issuance costs. The net proceeds were used for general corporate
purposes. Also, during September 2014, we redeemed $0.8billion
aggregate principal amount of Verizon 1.25% Notes due November
2014 and recorded an immaterial amount of early debt redemp-
tion costs.
During October 2014, we issued $6.5billion aggregate principal
amount of fixed rate notes. The issuance of these notes resulted
in cash proceeds of approximately $6.4billion, net of discounts
and issuance costs and after reimbursement of certain expenses.
Theissuance consisted of the following: $1.5billion aggregate
principal amount of 3.00% Notes due 2021, $2.5billion aggregate
principal amount of 3.50% Notes due 2024, and $2.5billion
aggregate principal amount of 4.40% Notes due 2034. The net
proceeds from the issuance was used to redeem (i)in whole the
following series of outstanding notes which were called for early
redemption in November2014 (collectively, November Early Debt
Redemption): $0.5billion aggregate principal amount of Verizon
Communications 4.90% Notes due 2015 at 103.7% of the principal
amount of such notes, $0.6billion aggregate principal amount of
Verizon Communications 5.55% Notes due 2016 at 106.3% of the
principal amount of such notes, $1.3billion aggregate principal amount
of Verizon Communications 3.00% Notes due 2016 at 103.4% of
the principal amount of such notes, $0.4billion aggregate principal
amount of Verizon Communications 5.50% Notes due 2017 at 110.5%
of the principal amount of such notes, $0.7billion aggregate principal
amount of Verizon Communications 8.75% Notes due 2018 at 125.2%
of the principal amount of such notes, $0.1billion aggregate principal
amount of Alltel Corporation 7.00% Debentures due 2016 at 108.7% of
the principal amount of such notes and $0.4billion aggregate principal
amount of Cellco Partnership and Verizon Wireless Capital LLC 8.50%
Notes due 2018 at 124.5% of the principal amount of such notes; and
(ii)$1.0billion aggregate principal amount of Verizon Communications
2.50% Notes due 2016 at 103.0% of the principal amount of such
notes. Proceeds not used for the redemption of these notes were
used for general corporate purposes. Any accrued and unpaid interest
was paid to the date of redemption (see “Early Debt Redemption and
Other Costs”).
During December 2014, we issued €1.4billion aggregate principal
amount of 1.625% Notes due 2024 and €1.0billion aggregate
principal amount of 2.625% Notes due 2031. The issuance of these
Notes resulted in cash proceeds of approximately $3.0billion,
net of discounts and issuance costs and after reimbursement
of certain expenses. The net proceeds were used for general
corporate purposes.
Verizon Notes (Non-Cash Transaction)
During February 2014, in connection with the Wireless Transaction,
we issued $5.0billion aggregate principal amount of floating rate
notes. The Verizon Notes were issued in two separate series, with
$2.5billion due February21, 2022 and $2.5billion due February21,
2025. The Verizon Notes bear interest at a floating rate, which will be
reset quarterly, with interest payable quarterly in arrears, beginning
May21, 2014 (see Note2). The eight-year Verizon notes bear interest
at a floating rate equal to three-month LIBOR, plus 1.222%, and the
eleven-year Verizon notes bear interest at a floating rate equal to
three-month LIBOR, plus 1.372%.
Preferred Stock (Non-Cash Transaction)
As a result of the Wireless Transaction, we assumed long-term obliga-
tions with respect to 5.143% Class D and Class E cumulative Preferred
Stock issued by one of the Purchased Entities. Both the Class D
shares (825,000 shares outstanding) and Class E shares (825,000
shares outstanding) are mandatorily redeemable in April 2020 at
$1,000 per share plus any accrued and unpaid dividends. Dividends
accrue at 5.143% per annum and will be treated as interest expense.
Both the Class D and Class E shares have been classified as liability
instruments and were recorded at fair value as determined at the
closing of the Wireless Transaction.
Term Loan Agreement
During February 2014, we drew $6.6billion pursuant to a term loan
agreement, which was entered into during October 2013, with a
group of major financial institutions to finance, in part, the Wireless
Transaction. $3.3billion of the loans under the term loan agreement
had a maturity of three years (the 3-Year Loans) and $3.3billion of
the loans under the term loan agreement had a maturity of five years
(the5-Year Loans). The 5-Year Loans provide for the partial amorti-
zation of principal during the last two years that they are outstanding.
Loans under the term loan agreement bear interest at floating rates.
The term loan agreement contains certain negative covenants,
including a negative pledge covenant, a merger or similar transaction
covenant and an accounting changes covenant, affirmative covenants
and events of default that are customary for companies maintaining
an investment grade credit rating. In addition, the term loan agreement
requires us to maintain a leverage ratio (as defined in the term loan
agreement) not in excess of 3.50:1.00, until our credit ratings are
equal to or higher than A3 and A- at Moody’s Investors Service and
Standard& Poor’s Ratings Services, respectively.
During June 2014, we issued $3.3billion aggregate principal amount
of fixed and floating rate notes resulting in cash proceeds of approxi-
mately $3.3billion, net of discounts and issuance costs. The issuances
consisted of the following: $1.3billion aggregate principal amount of
Floating Rate Notes due 2017 that will bear interest at a rate equal
to three-month LIBOR plus 0.40% which will be reset quarterly and
$2.0billion aggregate principal amount of 1.35% Notes due 2017. We
used the net proceeds from the offering of these notes to repay the
3-Year Loans on June12, 2014.
During July 2014, we amended the term loan agreement, settled the
outstanding $3.3billion of 5-Year Loans and borrowed $3.3billion of
new loans. The new loans mature in July 2019, bear interest at a lower
interest rate and require lower amortization payments in 2017 and
2018. In connection with the transaction, which primarily settled on a
net basis, we recorded approximately $0.5billion of proceeds from
long-term borrowings and of repayments of long-term borrowings,
respectively.
58 Verizon Communications Inc. and Subsidiaries
Notes to Consolidated Financial Statements continued