Sprint - Nextel 2005 Annual Report Download - page 133

SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Bank Credit Facilities
As of December 31, 2005, our bank credit facilities provide for total unsecured financing capacity of $10.2
billion, of which we have borrowed $3.2 billion and have $2.5 billion of outstanding letters of credit, resulting in
$4.5 billion of available revolving credit.
On December 19, 2005, we entered into a new bank credit facility, consisting of a five year $6.0 billion revolving
credit facility and a 364 day $3.2 billion term loan, for a total unsecured financing capacity of $9.2 billion. Under
the terms of this new loan, the interest rate equates to the London Interbank Offered Rate, or LIBOR, or the
prime rate plus a spread that varies depending on the applicable borrower’s or guarantor’s credit ratings. The
$6.0 billion revolving credit facility is also subject to a facility fee on the total facility which is payable quarterly.
Facility fees can vary between 4 to 15 basis points based upon our credit ratings. This facility replaces the
existing Nextel credit agreement, which included a $4.0 billion revolving credit facility and a $2.2 billion term
loan. In connection with the execution of the new credit agreement, the $3.2 billion term loan was used to
refinance the outstanding term loan and revolving credit loans under the existing Nextel credit agreement, which
was terminated in connection with entering into the new credit agreement.
The transaction related to the term loan was accounted for as a modification of debt in accordance with EITF
Issue No. 96-19, Debtor’s Accounting for a Modification or Exchange of Debt Instruments, because the terms of
the new loan were not substantially different from the terms of the original loan. Thus, the $15 million
unamortized premium associated with the original $2.2 billion loan will be amortized over the remaining life of
the new loan.
The refinancing of the revolving credit facility was accounted for in accordance with EITF Issue No. 98-14,
Debtor’s Accounting for Changes in Line-of-Credit or Revolving-Debt Arrangements. Because the borrowing
capacity of the new facility is greater than the borrowing capacity of the original facility, any unamortized
discount plus any debt issue costs are deferred and amortized over the remaining term of the new facility. Thus,
$9 million of unamortized discount and $4 million of debt issue costs will be amortized over the remaining life of
the new facility.
The $2.5 billion of letters of credit that were outstanding under the Nextel credit agreement remain outstanding
under the new $6.0 billion revolving credit facility. We also have an additional $118 million of outstanding
letters of credit as of December 31, 2005 used for various financial obligations.
Our credit facility requires compliance with a financial ratio test as defined under the credit agreement. The
maturity dates of the loans may accelerate if we do not comply with the financial ratio test. As of December 31,
2005, we were in compliance with the financial ratio test under our credit facility. We are also obligated to repay
the loans if certain change of control events occur. Borrowings under the facility are unsecured.
Our ability to borrow additional amounts under the credit facility may be restricted by provisions included in
some of our public notes that limit the incurrence of additional indebtedness in certain circumstances. The
availability of borrowings under this facility also is subject to the satisfaction or waiver of specified borrowing
conditions. As of December 31, 2005, we have satisfied the conditions under this facility.
The credit facility also contains covenants which limit our ability and the ability of some of our subsidiaries to
incur additional indebtedness, including guaranteeing obligations of other entities, creating liens, consolidating,
merging or selling all or substantially all of our and their assets and entering into transactions with affiliates.
Although these covenants are similar to those contained in our previous credit facility, they have been revised
under the new credit facility to provide us with greater operating flexibility.
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