Verizon Wireless 2008 Annual Report Download - page 58

In April 2007, Verizon issued $750 million of 5.50% notes due 2017, $750
million of 6.25% notes due 2037, and $500 million of floating rate notes
due 2009 resulting in cash proceeds of $1,977 million, net of discounts
and issuance costs. In March 2007, Verizon issued $1,000 million of
13-month floating rate exchangeable notes with an original maturity of
2008. These notes were exchangeable periodically at the option of the
note holder into similar notes until 2017. The exchangeable notes were
not exchanged and are now due April 2009. In February 2007, Verizon
utilized a $425 million floating rate vendor financing facility due 2013.
In January 2007, we redeemed $1,580 million principal of the remaining
outstanding floating rate notes due August 15, 2007, at a redemption
price equal to 100% of the principal amount of the notes being redeemed
plus accrued and unpaid interest through the date of redemption. The
total payment on the date of redemption was approximately $1,593 mil-
lion. Approximately $1,600 million of other borrowings were redeemed
during 2007.
We recorded pretax charges of $26 million ($16 million after-tax) during
the first quarter of 2006 resulting from the extinguishment of $5,665
million aggregate principal amount of long-term debt assumed in con-
nection with the MCI merger.
Verizon Wireless – Notes Payable and Other
Unless indicated, the following notes were co-issued or co-borrowed
by Verizon Wireless and Verizon Wireless Capital LLC. Verizon Wireless
Capital LLC is a wholly owned subsidiary of Verizon Wireless. It is a lim-
ited liability company formed under the laws of Delaware on December
7, 2001 as a special purpose finance subsidiary to facilitate the offering
of debt securities of Verizon Wireless by acting as co-issuer. Other than
the financing activities as a co-issuer of Verizon Wireless indebtedness,
Verizon Wireless Capital LLC has no material assets, operations or reve-
nues. Verizon Wireless is jointly and severally liable with Verizon Wireless
Capital LLC for these notes.
On December 18, 2008, Verizon Wireless and Verizon Wireless Capital
LLC, co-issued €650 million of 7.625% notes due 2011, €500 million of
8.750% notes due 2015 and £600 million of 8.875% notes due 2018.
Concurrent with these offerings, we entered into cross currency swaps
to fix our future interest and principal payments in U.S. dollars as well
as to exchange the proceeds from British Pound Sterling and Euros into
U.S. dollars (see Note 11). The cash proceeds of $2,410 million, net of
discounts and issuance costs were used in connection with the Alltel
acquisition on January 9, 2009 (see Note 2).
On November 21, 2008, Verizon Wireless and Verizon Wireless Capital
LLC co-issued a private placement of $1,250 million of 7.375% notes
due 2013 and $2,250 million of 8.500% notes due 2018 resulting in cash
proceeds of $3,451 million net of discounts and issuance costs. The net
proceeds from the sale of these notes were used in connection with
the Alltel acquisition on January 9, 2009 (see Note 2). The co-issuers
are required to file a registration statement with respect to an offer to
exchange these notes for a new issue of notes registered under the
Securities Act of 1933 and use their reasonable best efforts to cause the
registration statement to be declared effective within 330 days after the
closing of the offering of these notes.
On September 30, 2008, Verizon Wireless and Verizon Wireless Capital LLC
entered into a $4,440 million Three-Year Term Loan Facility Agreement
(Three-Year Term Facility) with Citibank, N.A., as Administrative Agent,
with a maturity date of September 30, 2011. Verizon Wireless borrowed
$4,440 million under the Three-Year Term Facility in order to repay
a portion of the 364-Day Credit Agreement as described below. Of
the $4,440 million, $444 million must be repaid at the end of the first
year, $1,998 million at the end of the second year, and $1,998 million
upon final maturity. Interest on borrowings under the Three-Year Term
Facility is calculated based on the LIBOR rate for the applicable period
and a margin that is determined by reference to the long-term credit
rating of Verizon Wireless issued by Standard & Poor’s Rating Services
and Moody’s Investors Service (if Moody’s subsequently determines
to provide a credit rating for the Three-Year Term Facility). Borrowings
under the Three-Year Term Facility currently bear interest at a variable
rate based on LIBOR plus 100 basis points. The Three-Year Term Facility
includes a requirement to maintain a certain leverage ratio.
On June 5, 2008, Verizon Wireless entered into a $7,550 million 364-
Day Credit Agreement with Morgan Stanley Senior Funding Inc. as
Administrative Agent. During 2008, Verizon Wireless utilized this facility
primarily to purchase the Alltel debt obligations acquired in the second
quarter and pay fees and expenses incurred in connection therewith,
finance the acquisition of Rural Cellular and repay the outstanding Rural
Cellular debt and pay fees and expenses incurred in connection there-
with. During 2008, the borrowings under the 364-Day Credit Agreement
were repaid.
See Note 2 regarding the recent repayment of Alltel debt and related
borrowings subsequent to December 31, 2008.
Telephone and Other Subsidiary Debt
During the fourth quarter of 2008, $200 million of Verizon Northwest
5.55% notes, $250 million 6.9% notes and $250 million 5.65% notes of
Verizon North Inc. matured and were repaid. During the second quarter
of 2008, $100 million of Verizon California Inc. 7.0% notes and $250
million of Verizon New York Inc. 6.0% notes matured and were repaid.
Additionally, during first half of 2008, $250 million of GTE Corporation
6.46% notes and $125 million of Verizon South Inc. 6.0% notes matured
and were repaid.
During the fourth quarter of 2007, Verizon New England Inc. redeemed
previously guaranteed $480 million 7.0% debentures, Series B, issued
by Verizon New England Inc. due 2042 at par plus accrued and unpaid
interest to the redemption dates. During the third quarter of 2007, $150
million Verizon Pennsylvania Inc. 7.375% notes matured and were repaid.
During the second quarter of 2007, $125 million Verizon New England
Inc. 7.65% notes and the $225 million Verizon South Inc. 6.125% notes
matured and were repaid. During the first quarter of 2007, $150 million
GTE Southwest Inc. 6.23% notes and the $275 million Verizon California
Inc. 7.65% notes matured and were repaid. In addition, we redeemed
$500 million of GTE Corporation 7.9% debentures due February 1, 2027
and $300 million Verizon South Inc. 7.0% debentures, Series F, due 2041
at par plus accrued and unpaid interest to the redemption dates. During
the first quarter of 2007, we recorded pretax charges of $28 million ($18
million after-tax) in connection with the early extinguishments of debt.
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Notes to Consolidated Financial Statements continued