Verizon Wireless 2013 Annual Report Download - page 27

25
Verizon Delaware LLC Debentures due December 2023 at a redemption
price of 100% of the principal amount of the debentures. Any accrued
and unpaid interest was paid to the date of redemption.
In addition, during 2013 we utilized $0.2 billion under xed rate vendor
nancing facilities.
DuringFebruary2014,weissued€1.75billionaggregateprincipalamount
of2.375%Notesdue2022,€1.25billionaggregateprincipalamountof
3.25% Notes due 2026 and £0.85 billion aggregate principal amount of
4.75% Notes due 2034. The issuance of these Notes resulted in cash pro-
ceeds of approximately $5.4 billion, net of discounts and issuance costs.
The net proceeds were used, in part, to nance the Wireless Transaction.
Any net proceeds not used to nance the Wireless Transaction will be used
forgeneralcorporatepurposes.Also,duringFebruary2014,weissued$0.5
billionaggregateprincipalamountof5.9%RetailNotesdue2054resulting
in cash proceeds of approximately $0.5 billion, net of discounts and issu-
ance costs. The proceeds will be used for general corporate purposes.
Verizon Notes
DuringFebruary2014,inconnectionwiththeWirelessTransaction,we
issued $5.0 billion aggregate principal amount of oating rate notes.
The Verizon Notes were issued in two separate series, with $2.5 bil-
liondueFebruary21,2022and$2.5billiondueFebruary21,2025.The
Verizon Notes bear interest at a oating rate, which will be reset quar-
terly,withinterestpayablequarterlyinarrears,beginningMay21,2014
(see“AcquisitionsandDivestitures”).Theeight-yearVerizonnotesbear
interestataoatingrateequaltothree-monthLIBOR,plus1.222%,and
the eleven-year Verizon notes bear interest at a oating rate equal to
three-monthLIBOR,plus1.372%.
Term Loan Agreement
During October 2013, we entered into a term loan agreement with a
group of major nancial institutions pursuant to which we drew $6.6 bil-
lioninFebruary2014tonance,inpart,theWirelessTransactionandto
pay transaction costs. Half of any loans under the term loan agreement
have a maturity of three years and the other half have a maturity of ve
years (the 5-Year Loans). The 5-Year Loans provide for the partial amorti-
zation of principal during the last two years that they are outstanding.
Loans under the term loan agreement bear interest at oating rates. The
term loan agreement contains certain negative covenants, including a
negative pledge covenant, a merger or similar transaction covenant and
an accounting changes covenant, armative covenants and events of
default that are customary for companies maintaining an investment
grade credit rating. In addition, the term loan agreement requires us to
maintain a leverage ratio (as dened in the term loan agreement) not in
excess of 3.50:1.00, until our credit ratings reach a certain level.
Bridge Credit Agreement
During September 2013, we entered into a $61.0 billion bridge credit
agreement with a group of major nancial institutions. The credit agree-
ment provided us with the ability to borrow up to $61.0 billion to
nance, in part, the Wireless Transaction and to pay related transaction
costs.FollowingtheSeptember2013issuanceofnotes,borrowingavail-
ability under the bridge credit agreement was reduced to $12.0 billion.
FollowingtheeectivenessofthetermloanagreementinOctober2013,
the bridge credit agreement was terminated in accordance with its terms
and as such, the related fees of $0.2 billion were recognized in Other
income and (expense), net during the fourth quarter of 2013.
2012
During January 2012, $1.0 billion of 5.875% Verizon New Jersey Inc.
Debenturesmaturedandwererepaid.DuringFebruary2012,$0.8bil-
lion of 5.25% Verizon Wireless Notes matured and were repaid. During
July 2012, $0.8 billion of 7.0% Verizon Wireless Notes matured and were
repaid. In addition, during 2012 we utilized $0.2 billion under xed rate
vendor nancing facilities.
During 2012, we received $0.4 billion related to the sale of some of our 700
MHzlowerAandBblockspectrumlicenses.Weacquiredtheselicensesas
partofFederalCommunicationsCommission(FCC)Auction73in2008.
Other, net
During 2011, Other, net primarily included proceeds related to the sales
of long-term investments, which were not signicant to our consolidated
statements of income.
Cash Flows Provided by (Used In) Financing Activities
We seek to maintain a mix of xed and variable rate debt to lower bor-
rowing costs within reasonable risk parameters and to protect against
earnings and cash ow volatility resulting from changes in market condi-
tions. During 2013, 2012 and 2011, net cash provided by (used in) nancing
activities was $26.5 billion, $(21.3) billion and $(5.8) billion, respectively.
2013
DuringMarch2013,weissued$0.5billionaggregateprincipalamountof
oating rate Notes due 2015 in a private placement resulting in cash pro-
ceeds of approximately $0.5 billion, net of discounts and issuance costs.
The proceeds were used for the repayment of commercial paper.
During April 2013, $1.25 billion of 5.25% Verizon Communications Notes
maturedandwererepaid.DuringMay2013,$0.1billionof7.0%Verizon
New York Inc. Debentures matured and were repaid. During June 2013,
$0.5 billion of 4.375% Verizon Communications Notes and $0.1 billion
of 7.0% Verizon New York Inc. Debentures matured and were repaid. In
addition, during June 2013, we redeemed $0.25 billion of 7.15% Verizon
MarylandLLCDebenturesdueMay2023ataredemptionpriceof100%
of the principal amount of the debentures.
During September 2013, in connection with the Wireless Transaction, we
issued $49.0 billion aggregate principal amount of xed and oating rate
notes resulting in cash proceeds of approximately $48.7 billion, net of dis-
counts and issuance costs. The issuances consisted of the following: $2.25
billion aggregate principal amount of oating rate Notes due 2016 that
bear interest at a rate equal to three-month London Interbank Oered
Rate(LIBOR)plus1.53%whichratewillberesetquarterly,$1.75billion
aggregate principal amount of oating rate Notes due 2018 that bear
interestatarateequaltothree-monthLIBORplus1.75%whichratewillbe
reset quarterly, $4.25 billion aggregate principal amount of 2.50% Notes
due 2016, $4.75 billion aggregate principal amount of 3.65% Notes due
2018, $4.0 billion aggregate principal amount of 4.50% Notes due 2020,
$11.0 billion aggregate principal amount of 5.15% Notes due 2023, $6.0
billion aggregate principal amount of 6.40% Notes due 2033 and $15.0
billion aggregate principal amount of 6.55% Notes due 2043 (collectively,
the new notes). The proceeds of the new notes were used to nance, in
part, the Wireless Transaction and to pay related fees and expenses. As
a result of the issuance of the new notes, we incurred interest expense
related to the Wireless Transaction of $0.7 billion during 2013.
During October 2013, $0.3 billion of 4.75% Verizon New England Inc.
Debentures matured and were repaid.
During November 2013, $1.25 billion of 7.375% Verizon Wireless Notes
and $0.2 billion of 6.5% Verizon Wireless Notes matured and were repaid.
During November 2013, Verizon Wireless redeemed $3.5 billion of 5.55%
NotesdueFebruary1,2014ataredemptionpriceof101%oftheprin-
cipal amount of the notes and $0.3 billion of 6.70% Verizon New York
Inc. Debentures due November 2023 at a redemption price of 100% of
the principal amount of the debentures. Any accrued and unpaid interest
was paid to the date of redemption.
During December 2013, we redeemed $0.2 billion of 7.0% Verizon New
York Inc. Debentures due December 2033 at a redemption price of
100% of the principal amount of the debentures and $20 million of 7.0%
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued