McDonalds 2007 Annual Report Download - page 60

Debt obligations
The Company has incurred debt obligations principally through
public and private offerings and bank loans. There are no provi-
sions in the Company’s debt obligations that would accelerate
repayment of debt as a result of a change in credit ratings or a
material adverse change in the Company’s business. Certain of
the Company’s debt obligations contain cross-acceleration
provisions, and restrictions on Company and subsidiary mortgages
and the long-term debt of certain subsidiaries. Under certain
agreements, the Company has the option to retire debt prior to
maturity, either at par or at a premium over par.
The following table summarizes the Company’s debt obligations.
(Interest rates refl ected in the table include the effects of interest
rate and foreign currency exchange agreements.)
I nterest rates
(1)
Amounts outstanding
December 31 December 31
Maturity
IN MILLIONS OF U.S. DOLLARS
dates 2007 2006 2007 2006
Fixed-original issue 5.5% 4.9% $3,497.5 $2,367.1
Fixed-converted via exchange agreements
(2)
5.3 4.5 (455.2) (808.1)
Floating 4.8 5.1 160.0 151.7
Total U.S. Dollars 2008-2037 3,202.3 1,710.7
Fixed 2.7 3.2 121.8 447.6
Floating 4.8 3.6 2,093.3 2,342.0
Total Euro 2008-2013 2,215.1 2,789.6
Fixed 6.0 6.0 1,078.8 1,067.4
Floating 6.5 5.5 689.9 785.6
Total British Pounds Sterling 2008-2032 1,768.7 1,853.0
Total Japanese Yen-fi xed 2010-2030 2.2 2.2 585.0 549.3
Fixed 3.4 4.0 497.8 351.5
Floating 5.7 5.1 946.9 1,044.8
Total other currencies
(3)
2008-2014 1,444.7 1,396.3
Debt obligations before fair value adjustments
(4)
9,215.8 8,298.9
Fair value adjustments
(5)
85.3 108.7
Total debt obligations
(6)
$9,301.1 $8,407.6
(1) Weighted-average effective rate, computed on a semi-annual basis.
(2) A portion of U.S. Dollar fi xed-rate debt effectively has been converted into other currencies and/or into fl oating-rate debt through the use of exchange agreements. The rates
shown refl ect the fi xed rate on the receivable portion of the exchange agreements. All other obligations in this table refl ect the net effects of these and other exchange agreements.
(3) Primarily consists of Swiss Francs, Chinese Renminbi, Hong Kong Dollars, Korean Won, Australian Dollars and Singapore Dollars.
(4) Aggregate maturities for 2007 debt balances, before fair value adjustments, were as follows (in millions): 2008–$1,991.0; 2009–$448.8; 2010–$539.5; 2011–$552.0; 2012–
$2,217.4; Thereafter–$3,467.1. These amounts include a reclassifi cation of short-term obligations totaling $1.3 billion to long-term obligations as they are supported by a long-term
line of credit agreement expiring in 2012.
(5) SFAS No. 133 requires that the carrying value of underlying items in fair value hedges, in this case debt obligations, be adjusted for fair value changes to the extent they are
attributable to the risk designated as being hedged. The related hedging instrument is also recorded at fair value in either miscellaneous other assets or other long-term liabilities.
A portion ($37.1 million) of the adjustments at December 31, 2007 related to interest rate exchange agreements that were terminated in December 2002 and will amortize as a
reduction of interest expense over the remaining life of the debt.
(6) Includes notes payable, current maturities of long-term debt and long-term debt included in the Consolidated balance sheet. The increase in debt obligations from
December 31, 2006 to December 31, 2007 was due to net issuances ($572.6 million), changes in exchange rates on foreign currency denominated debt ($341.6 million) and
other changes ($2.7 million), partly offset by SFAS No. 133 non-cash fair value adjustments ($23.4 million).
ESOP loans and other guarantees
Borrowings related to the ESOP at December 31, 2007, which
include $71.5 million of loans from the Company to the ESOP,
are refl ected as debt with a corresponding reduction of
shareholders’ equity (additional paid-in capital included a balance
of $63.8 million and $71.1 million at December 31, 2007 and
2006 respectively). The ESOP is repaying the loans and interest
through 2018 using Company contributions and dividends from
its McDonald’s common stock holdings. As the principal amount
of the borrowings is repaid, the debt and the unearned ESOP
compensation (additional paid-in capital) are being reduced.
The Company does not have any other signifi cant guarantees at
December 31, 2007.
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