UPS 2007 Annual Report Download - page 88

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Facility Notes and Bonds:
We have entered into agreements with certain municipalities to finance the construction of, or
improvements to, facilities that support our U.S. Domestic Package and Supply Chain & Freight operations in the
United States. These facilities are located around airport properties in Louisville, KY; Dallas, TX; Philadelphia,
PA; and Dayton, OH. Under these arrangements, we enter into a lease or loan agreement that covers the debt
service obligations on the bonds issued by the municipalities, as follows:
• Bonds with a principal balance of $149 million issued by the Louisville Regional Airport Authority
associated with our Worldport facility in Louisville, KY. The bonds, which are due in January 2029,
bear interest at a variable rate, and the average interest rates for 2007 and 2006 were 3.62% and 3.43%,
respectively.
• Bonds with a principal balance of $43 million issued by the Louisville Regional Airport Authority
associated with our air freight facility in Louisville, KY. The bonds were issued in November 2006 and
are due in November 2036. The bonds bear interest at a variable rate, and the average interest rates for
2007 and 2006 were 3.62% and 3.77% (from the time of issuance in November 2006), respectively.
• Bonds with a principal balance of $29 million issued by the Dallas / Forth Worth International Airport
Facility Improvement Corporation associated with our Dallas, TX airport facilities. The bonds are due
in May 2032 and bear interest at a variable rate, however the variable cash flows on the obligation have
been swapped to a fixed 5.11%.
• Bonds with a principal balance of $100 million issued by the Delaware County, Pennsylvania Industrial
Development Authority associated with our Philadelphia, PA airport facilities. The bonds, which are
due in December 2015, bear interest at a variable rate, and the average interest rates for 2007 and 2006
were 3.54% and 3.34%, respectively.
• Bonds with a principal balance of $108 million issued by the city of Dayton, OH associated with the
Dayton airport facility, $62 million of which is due in 2009 and the remaining $46 million is due in
2018. The balance due in 2018 is callable beginning in 2008. The bond principal due in 2018 bears
interest at a fixed rate of 5.63%, while the bond principal due in 2009 bears interest at fixed rates
ranging from 6.05% to 6.20%.
UPS Notes:
The UPS Notes program involves the periodic issuance of fixed rate notes in $1,000 increments with various
terms and maturities. At December 31, 2007, the coupon rates of the outstanding notes varied between 3.00% and
6.20%, and the interest payments are made either monthly, quarterly or semiannually. The maturities of the notes
range from 2008 to 2027. Substantially all of the fixed obligations associated with the notes were swapped to
floating rates, based on different LIBOR indices plus or minus a spread. The average interest rate payable on the
swaps for 2007 and 2006 was 4.83% and 4.73%, respectively.
Pound Sterling Notes:
The Pound Sterling notes were issued in 2001 with a principal balance of £500 million, accrue interest at a
5.50% fixed rate, and are due on February 12, 2031. In May 2007, we completed an exchange offer for the
existing notes. Holders of £434 million of the notes accepted the exchange offer, and as a result, these notes were
exchanged for new notes with a principal amount of £455 million, bearing interest at 5.13% and due in February
2050. The new notes are callable at our option at a redemption price equal to the greater of 100% of the principal
amount and accrued interest, or the sum of the present values of the remaining scheduled payout of principal and
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