McDonalds 2010 Annual Report Download - page 41

Debt Financing
LINE OF CREDIT AGREEMENTS
At December 31, 2010, the Company had a $1.3 billion line of
credit agreement expiring in March 2012 with fees of 0.05% per
annum on the total commitment, which remained unused. Fees
and interest rates on this line are based on the Company’s long-
term credit rating assigned by Moody’s and Standard & Poor’s. In
addition, the Company including certain subsidiaries outside the
U.S. had unused lines of credit totaling $952.0 million at
December 31, 2010; these lines of credit were primarily
uncommitted, short-term and denominated in various currencies
at local market rates of interest.
The weighted-average interest rate of short-term borrowings
was 4.3% at December 31, 2010 (based on $595.0 million of
foreign currency bank line borrowings) and 4.1% at
December 31, 2009 (based on $598.7 million of foreign cur-
rency bank line borrowings).
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 provi-
sions, 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 Company has
no current plans to retire a significant amount of its debt prior to
maturity.
ESOP LOANS
Borrowings related to the leveraged Employee Stock Ownership
Plan (ESOP) at December 31, 2010, which include $47.7 million
of loans from the Company to the ESOP, are reflected as debt
with a corresponding reduction of shareholders’ equity (additional
paid-in capital included a balance of $41.7 million and $48.4 mil-
lion at December 31, 2010 and 2009, 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 reduced.
The following table summarizes the Company’s debt obligations. (Interest rates and debt amounts reflected in the table include the
effects of interest rate exchange agreements.)
Interest rates(1)
December 31 Amounts outstanding December 31
In millions of U.S. Dollars Maturity dates 2010 2009 2010 2009
Fixed 5.4% 5.6% $ 5,318.0 $ 4,677.6
Floating 3.0 2.9 1,390.0 1,300.0
Total U.S. Dollars 2011-2040 6,708.0 5,977.6
Fixed 4.8 4.8 737.5 932.6
Floating 2.2 1.8 753.4 683.9
Total Euro 2011-2017 1,490.9 1,616.5
Total British Pounds Sterling-Fixed 2020-2032 6.0 6.0 700.7 726.2
Fixed 2.1 2.0 338.7 488.6
Floating 0.5 1.0 985.4 537.0
Total Japanese Yen 2011-2030 1,324.1 1,025.6
Fixed 2.5 2.7 451.6 359.6
Floating 4.1 3.8 752.6 793.3
Total other currencies(2) 2011-2021 1,204.2 1,152.9
Debt obligations before fair value adjustments(3) 11,427.9 10,498.8
Fair value adjustments(4) 77.4 79.6
Total debt obligations(5) $11,505.3 $10,578.4
(1) Weighted-average effective rate, computed on a semi-annual basis.
(2) Primarily consists of Swiss Francs, Chinese Renminbi and Korean Won.
(3) Aggregate maturities for 2010 debt balances, before fair value adjustments, were as follows (in millions): 2011–$8.3; 2012–$2,212.4; 2013–$1,006.4; 2014-$707.9; 2015-
$675.2; Thereafter–$6,817.7. These amounts include a reclassification of short-term obligations totaling $1.2 billion to long-term obligations as they are supported by a long-term line
of credit agreement expiring in March 2012.
(4) The carrying value of underlying items in fair value hedges, in this case debt obligations, are 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 prepaid expenses and other current assets, miscellaneous other assets or other long-term liabilities. A por-
tion ($5.1 million) of the adjustments at December 31, 2010 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.
(5) Includes notes payable, current maturities of long-term debt and long-term debt included on the Consolidated balance sheet. The increase in debt obligations from December 31, 2009
to December 31, 2010 was primarily due to (in millions): net issuances ($787.4) and changes in exchange rates on foreign currency denominated debt ($140.1).
McDonald’s Corporation Annual Report 2010 39