McDonalds 2014 Annual Report Download - page 49

McDonald’s Corporation 2014 Annual Report 43
Debt Financing
LINE OF CREDIT AGREEMENTS
At December 31, 2014, the Company had a $2.5 billion line of credit agreement expiring in December 2019 with fees of 0.060% 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's subsidiaries had unused lines of credit that 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 4.1% at December 31, 2014 (based on $862.9 million of foreign
currency bank line borrowings and $200.0 million of commercial paper) and 5.1% at December 31, 2013 (based on $609.7 million of foreign
currency bank line borrowings).
DEBT OBLIGATIONS
The Company has incurred debt obligations principally through public and private offerings and bank loans. There are no provisions 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 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, 2014, which include $16.0 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 $13.7 million and $19.9 million at December 31, 2014 and 2013, 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 swaps).
Interest rates(1)
December 31
Amounts outstanding
December 31
In millions of U.S. Dollars Maturity dates 2014 2013 2014 2013
Fixed 4.5% 4.6% $ 6,604.7 $ 6,460.6
Floating 3.2 3.2 2,450.0 1,900.0
Total U.S. Dollars 2015-2043 9,054.7 8,360.6
Fixed 3.2 3.3 3,014.7 2,884.9
Floating 2.9 2.8 320.3 357.2
Total Euro 2015-2029 3,335.0 3,242.1
Total British Pounds Sterling - Fixed 2020-2054 5.3 6.0 1,163.3 744.3
Total Chinese Renminbi - Floating 2015 5.6 5.4 630.1 525.1
Fixed 2.9 2.9 104.3 118.7
Floating 0.3 0.4 208.6 759.8
Total Japanese Yen 2016-2030 312.9 878.5
Fixed 2.1 1.9 268.3 281.0
Floating 4.0 3.6 220.7 85.4
Total other currencies(2) 2015-2056 489.0 366.4
Debt obligations before fair value adjustments(3) 14,985.0 14,117.0
Fair value adjustments(4) 4.7 12.8
Total debt obligations(5) $14,989.7 $14,129.8
(1) Weighted-average effective rate, computed on a semi-annual basis.
(2) Primarily consists of Swiss Francs and Korean Won.
(3) Aggregate maturities for 2014 debt balances, before fair value adjustments, were as follows (in millions): 2015–$0.0; 2016–$830.7; 2017–$1,069.1; 2018–
$1,005.0; 2019–$2,979.3; Thereafter–$9,100.9. These amounts include a reclassification of short-term obligations totaling $2.2 billion to long-term obligations as
they are supported by a long-term line of credit agreement expiring in December 2019.
(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.
(5) The net increase in 2014 was primarily due to net issuances of $1.5 billion partly offset by changes in exchange rates on foreign currency denominated debt of
$663 million.