Avon 2008 Annual Report Download - page 64

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
$1,000.0 debt shelf registration statement. The 4.20% Notes
mature on July 15, 2018, and bear interest at a per annum rate
of 4.20%, payable semi-annually. The carrying value of the
4.20% Notes represents the $250.0 principal amount, net of the
unamortized discount to face value of $.3 and $.9 at
December 31, 2008 and 2007, respectively.
In April 2003, the call holder of $100.0, 6.25% Notes due May
2018 (the “Notes”), embedded with put and call option
features, exercised the call option associated with these Notes,
and thus became the sole note holder of the Notes. Pursuant to
an agreement with the sole note holder, we modified these
Notes into $125.0 aggregate principal amount of 4.625% notes
due May 15, 2013. The modified principal amount represented
the original value of the putable/callable notes, plus the market
value of the related call option and approximately $4.0 principal
amount of additional notes issued for cash. In May 2003, $125.0
principal amount of registered senior notes were issued in
exchange for the modified notes held by the sole note holder.
No cash proceeds were received by us. The registered senior
notes mature on May 15, 2013, and bear interest at a per
annum rate of 4.625%, payable semi-annually (the “4.625%
Notes”). The 4.625% Notes were issued under our $1,000.0
debt shelf registration statement. The transaction was accounted
for as an exchange of debt instruments and, accordingly, the
premium related to the original notes is being amortized over
the life of the new 4.625% Notes. At December 31, 2008 and
2007, the carrying value of the 4.625% Notes represents the
$125.0 principal amount, net of the unamortized discount to
face value and the premium related to the call option associated
with the original notes totaling $10.9 and $13.0, respectively.
Annual maturities of long-term debt (including unamortized
discounts and premiums and excluding the adjustments for debt
with fair value hedges) outstanding at December 31, 2008, are
as follows:
2009 2010 2011 2012 2013
After
2013 Total
Maturities $4.3 $4.3 $502.8 $2.5 $375.8 $500.0 $1,389.7
Other Financing
We have a five-year, $1,000.0 revolving credit and competitive
advance facility (the “credit facility”), which expires in January
2011. The credit facility may be used for general corporate
purposes. The interest rate on borrowings under the credit facility
is based on LIBOR or on the higher of prime or
1
⁄ 2 %plusthe
federal funds rate. The credit facility has an annual fee of $.7,
payable quarterly, based on our current credit ratings. The credit
facility contains various covenants, including a financial covenant
which requires Avon’s interest coverage ratio (determined in
relation to our consolidated pretax income and interest expense)
to equal or exceed 4:1. At December 31, 2008 and 2007, there
were no amounts outstanding under the credit facility.
We maintain a $1,000.0 commercial paper program. Under the
program, we may issue from time to time unsecured promissory
notes in the commercial paper market in private placements
exempt from registration under federal and state securities laws,
for a cumulative face amount not to exceed $1,000.0 outstand-
ing at any one time and with maturities not exceeding 270 days
from the date of issue. The commercial paper short-term notes
issued under the program are not redeemable prior to maturity
and are not subject to voluntary prepayment. The commercial
paper program is supported by our credit facility. Outstanding
commercial paper effectively reduces the amount available for
borrowing under the credit facility. At December 31, 2008, we
had commercial paper outstanding of $499.7 at an average
annual interest rate of 2.3%.At December 31, 2007, we had
commercial paper outstanding of $701.6 at an average annual
interest rate of 5.05%.
In April 2007, we entered into a one-year, Euro 50 million ($72.9
at the exchange rate on December 31, 2007) uncommitted
credit facility (“Euro credit facility”) with the Bank of Tokyo-
Mitsubishi UFJ, Ltd., which expired in April 2008. Borrowings
under the Euro credit facility bore interest at the Euro LIBOR rate
plus an applicable margin. The Euro credit facility was available
for general corporate purposes. The Euro credit facility was
designated as a hedge of our investments in our Euro-denom-
inated functional currency subsidiaries. At December 31, 2007,
$32.8 (euro 22.5 million) was outstanding under the Euro credit
facility.
In August 2006, we entered into a one-year, Japanese yen 11.0
billion ($122.0 at the exchange rate on December 31, 2008)
uncommitted credit facility (“yen credit facility”) with the Bank
of Tokyo-Mitsubishi UFJ, Ltd. Borrowings under the yen credit
facility bear interest at the yen LIBOR rate plus an applicable
margin. The yen credit facility is available for general corporate
purposes, including working capital and the repayment of
outstanding indebtedness. The yen credit facility was used to
repay the Japanese yen 9.0 billion note which came due in
September 2006, as well as for other general corporate
purposes. The yen credit facility is designated as a hedge of our
net investment in our Japanese subsidiary. In August 2007,
we entered into an amendment of our yen credit facility that
provides for the extension of the yen credit facility until August