Verizon Wireless 2009 Annual Report Download - page 31

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Management’s Discussion and Analysis
of Financial Condition and Results of Operations continued
During November 2009, Verizon Wireless and Verizon Wireless Capital
LLC, completed an exchange offer to exchange the privately placed
notes issued in November 2008, as well as in February and May 2009, for
new notes with similar terms, pursuant to the requirements of registra-
tion rights agreements.
In December 2008, Verizon Wireless obtained net proceeds of $2.4 billion
from the issuance of €0.7 billion of 7.625% notes due 2011, €0.5 billion
of 8.750% notes due 2015 and £0.6 billion of 8.875% notes due 2018. In
November 2008, Verizon Wireless obtained proceeds of $3.5 billion, net
of discounts and issuance costs, from the issuance in a private placement
of $1.3 billion of 7.375% notes due November 2013 and $2.3 billion of
8.500% notes due November 2018. These notes were used to fund the
acquisition of Alltel.
On September 30, 2008, Verizon Wireless and Verizon Wireless Capital LLC
entered into a $4.4 billion Three-Year Term Loan Facility Agreement (Three-
Year Term Facility) with a maturity date of September 30, 2011. Verizon
Wireless borrowed $4.4 billion under the Three-Year Term Facility in order
to repay a portion of the 364-Day Credit Agreement as described below.
On June 5, 2008, Verizon Wireless entered into a $7.6 billion 364-Day Credit
Agreement which included a $4.8 billion term facility and a $2.8 billion
delayed draw facility. On June 10, 2008, Verizon Wireless borrowed $4.8 bil-
lion under the 364-Day Credit Agreement in order to purchase Alltel debt
obligations acquired in the second quarter of 2008 and, during the third
quarter of 2008, borrowed $2.8 billion under the delayed draw facility to
complete the purchase of Rural Cellular and to repay Rural Cellular’s debt
and pay fees and expenses incurred in connection therewith. During 2008
the borrowings under the 364-Day Credit Agreement were repaid.
Verizon Communications
In March 2009, we issued $1.8 billion of 6.35% notes due 2019 and $1.0
billion of 7.35% notes due 2039, resulting in cash proceeds of $2.7 bil-
lion, net of discounts and issuance costs, which was used to reduce our
commercial paper borrowings, repay maturing debt and for general cor-
porate purposes. In January 2009, Verizon utilized a $0.2 billion floating
rate vendor financing facility due 2010.
During 2009, we redeemed $0.1 billion of 6.8% Verizon New Jersey Inc.
debentures, $0.3 billion of 6.7% and $0.2 billion of 5.5% Verizon California
Inc. notes and $0.2 billion of 5.875% Verizon New England Inc. notes. In
April 2009, we redeemed $0.5 billion of 7.51% GTE Corporation notes. In
addition during 2009, we redeemed $0.5 billion of floating rate and $0.1
billion of 8.23% Verizon notes.
During 2008, we made debt repayments of approximately $2.6 billion
which primarily included $0.2 billion of 5.55% Verizon Northwest notes,
$0.3 billion of 6.9% and $0.3 billion of 5.65% Verizon North Inc. notes, $0.1
billion of 7.0% Verizon California Inc. notes, $0.3 billion of 6.0% Verizon
New York Inc. notes, $0.3 billion of 6.46% GTE Corporation notes, $0.1
billion of 6.0% Verizon South Inc. notes, and $1.0 billion of 4.0% Verizon
Communications Inc. notes. As a result of the spin-off of our local exchange
business and related activities in Maine, New Hampshire and Vermont, in
March 2008, our net debt was reduced by approximately $1.4 billion.
In November 2008, Verizon issued $2.0 billion of 8.75% notes due 2018
and $1.3 billion of 8.95% notes due 2039, which resulted in cash proceeds
of $3.2 billion net of discount and issuance costs. In April 2008, Verizon
issued $1.3 billion of 5.25% notes due 2013, $1.5 billion of 6.10% notes
due 2018, and $1.3 billion of 6.90% notes due 2038, resulting in cash
proceeds of $4.0 billion, net of discounts and issuance costs. In February
2008, Verizon issued $0.8 billion of 4.35% notes due 2013, $1.5 billion of
5.50% notes due 2018, and $1.8 billion of 6.40% notes due 2038, resulting
in cash proceeds of $4.0 billion, net of discounts and issuance costs. In
January 2008, Verizon utilized a $0.2 billion fixed rate vendor financing
facility due 2010.
Cash Flows Provided By (Used In) Financing Activities
During 2009, net cash used in financing activities was $16.0 billion, com-
pared with the net cash provided by financing activities of $12.7 billion
in the similar period in 2008. During 2007, net cash used in financing
activities was $12.8 billion. Net proceeds from borrowings during 2009
were approximately $12.0 billion compared to $21.6 billion in the sim-
ilar period of 2008. Net proceeds from borrowings during 2007 were
$3.4 billion. Cash flows from financing activities during 2009, 2008 and
2007, primarily related to raising capital to support certain of our stra-
tegic initiatives, including completing the acquisition of Alltel, funding
the payments for spectrum in the 700 MHz auction including net debt
repayments and dividend payments as described below.
Our total debt increased by $10.3 billion in 2009. During 2009, Verizon
Wireless issued $9.3 billion of fixed and floating rate debt with varying
maturities and utilized a credit facility to complete the acquisition of
Alltel as described below. The increase in debt at December 31, 2009 also
reflects approximately $2.3 billion of assumed Alltel debt owed to third
parties. Additionally, Verizon Communications also issued $2.8 billion of
fixed rate debt with varying maturities. Partially offsetting the increase
in total debt was lower commercial paper outstanding and other debt
reductions as described below.
Verizon Wireless
During 2009, Verizon Wireless raised capital to fund the acquisition
of Alltel.
• On January 9, 2009, Verizon Wireless borrowed $12.4 billion under a
$17.0 billion credit facility (Bridge Facility) in order to complete the
acquisition of Alltel and repay a portion of the approximately $24
billion of Alltel debt assumed. Verizon Wireless used cash generated
from operations and the net proceeds from the sale of the notes in
private placements issued in February 2009, May 2009 and June 2009,
which are described below to repay the borrowings under the Bridge
Facility. No borrowings were outstanding under the Bridge Facility at
December 31, 2009 and the commitments under the Bridge Facility
have been terminated.
• In February 2009, Verizon Wireless and Verizon Wireless Capital LLC co-
issued $4.3 billion aggregate principal amount of three and five-year
fixed rate notes in a private placement resulting in cash proceeds of
$4.2 billion, net of discounts and issuance costs.
• In May 2009, Verizon Wireless and Verizon Wireless Capital LLC co-
issued $4.0 billion aggregate principal amount of two-year fixed and
floating rate notes in a private placement resulting in cash proceeds of
approximately $4.0 billion, net of discounts and issuance costs.
• In June 2009, Verizon Wireless issued $1.0 billion aggregate principal
amount of floating rate notes due 2011. Commencing on December 27,
2009 and on each quarterly interest payment date thereafter, both the
noteholders and Verizon Wireless have the right to require settlement of
all or a portion of these notes at par. Accordingly, the notes are classified
as current maturities in the consolidated balance sheet. As of December
31, 2009, neither Verizon Wireless nor the noteholders have exercised
their right to require settlement on any portion of these notes.
• On August 28, 2009, Verizon Wireless repaid $0.4 billion due under a
three-year term loan facility, reducing the outstanding borrowings
under this facility to $4.0 billion.
The increase in Other, net financing activities during 2009 was primarily
driven by higher distributions to Vodafone, which owns a 45% noncontrol-
ling interest in Verizon Wireless. In addition, Other, net financing activities
during 2009 included the buyout of wireless partnerships in which our
ownership interests increased as a result of the acquisition of Alltel.