Sprint - Nextel 2006 Annual Report Download - page 114

from time to time at a redemption price equal to the greater of 100% of the principal amount and the sum of
the present values of the remaining scheduled payments of principal and interest discounted to the redemption
date, on a semi-annual basis, at a U.S. Treasury note interest rate for the remaining term, plus 30 basis points,
plus, in each case, accrued interest. These notes are senior unsecured obligations and rank equal in right of
payment with all our other unsecured senior indebtedness.
In 2006, our 7.125% and 4.78% senior notes matured with an aggregate principal balance of $1.6 billion,
which we paid in cash. We paid a total of $2.7 billion in cash for our 2006 early redemptions as we:
kredeemed all of our outstanding 9.5% senior notes due 2011, with an outstanding principal balance of
$85 million, and our 6.0% senior notes due 2007, with an outstanding principal balance of
$1.6 billion;
kredeemed Nextel Partners’ 1.5% convertible senior notes due 2008, with an outstanding principal
balance of $140 million;
kredeemed Alamosa’s 13.625% senior notes due 2011, 12.0% senior notes due 2009, and 12.5% notes
due 2011, with an aggregate outstanding principal balance of $247 million;
kredeemed US Unwired’s first priority senior secured floating rate notes due 2010, with an outstanding
principal balance of $125 million, and IWO Holdings Inc.’s 10.75% senior discount notes due 2015,
with an outstanding principal balance of $140 million; and
kredeemed the 9.375% senior subordinated secured notes due 2009, and floating rate senior secured
notes due 2011, of an Alamosa subsidiary, with an aggregate outstanding principal balance of
$334 million.
In 2005, our 7.9% senior notes, with an outstanding principal balance of $1.0 billion, matured and were
retired.
Our weighted average effective interest rate related to our senior notes was 7.1% in 2006 and 2005. The
effective interest rate includes the effect of interest rate swap agreements accounted for as fair value hedges.
See note 10 for more details regarding interest rate swaps.
Equity Unit Notes
In 2001, we completed a registered offering of 69 million equity units, each with a stated amount of $25. Each
equity unit initially consisted of a corporate unit. Each corporate unit consisted of a forward purchase contract
and $25 principal amount of senior notes, or Notes, of our wholly-owned subsidiary, Sprint Capital. The
corporate unit could be converted by the holder into a treasury unit consisting of the forward purchase contract
and a treasury portfolio of zero-coupon U.S. treasury securities by substituting the treasury securities for the
Notes. The underlying Notes, or treasury portfolio, were pledged to us to secure the holder’s obligations under
the forward purchase contract. On August 17, 2004, the forward purchase contracts were settled by the
issuance of about 35 million shares of FON common stock in exchange for $1.7 billion in cash.
The Notes were originally issued as part of the equity units and had an interest rate of 6.0% for a notional
amount of $1.7 billion. In May 2004, we purchased $750 million principal amount of the Notes before their
scheduled maturity. As a result, we recognized a $29 million loss in other income due to the premium paid
and the write-off of unamortized debt issuance costs. The interest rate on the Notes was reset to 4.8% on
May 24, 2004, after a successful remarketing, and after the remarketing the Notes were no longer pledged to
secure the obligations under the original forward purchase contracts. As of December 31, 2005, $880 million
of the remarketed Notes, which matured in August 2006, were included in current portion of long-term debt
and capital lease obligations.
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SPRINT NEXTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)