Verizon Wireless 2014 Annual Report Download - page 57

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
55
interest payable quarterly in arrears, beginning May 21, 2014 (see Note
2). 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%.
Preferred Stock (Non-Cash Transaction)
As a result of the Wireless Transaction, we assumed long-term obliga-
tions with respect to 5.143% Class D and Class E cumulative Preferred
Stock issued by one of the Purchased Entities. Both the Class D shares
(825,000 shares outstanding) and Class E shares (825,000 shares out-
standing) are mandatorily redeemable in April 2020 at $1,000 per share
plus any accrued and unpaid dividends. Dividends accrue at 5.143% per
annum and will be treated as interest expense. Both the Class D and Class
E shares have been classied as liability instruments and were recorded at
fair value as determined at the closing of the Wireless Transaction.
Term Loan Agreements
During February 2014, we drew $6.6 billion pursuant to a term loan
agreement, which was entered into during October 2013, with a group
of major nancial institutions to nance, in part, the Wireless Transaction.
$3.3 billion of the loans under the term loan agreement had a maturity of
three years (the 3-Year Loans) and $3.3 billion of the loans under the term
loan agreement had a maturity of ve years (the 5-Year Loans). The 5-Year
Loans provide for the partial amortization 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 com-
panies 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 rat-
ings are equal to or higher than A3 and A- at Moody’s Investors Service
and Standard & Poor’s Ratings Services, respectively.
The Tender Oer for each series of notes was subject to a nancing con-
dition, which was either satised or waived with respect to all series. The
Tender Oer expired on March 17, 2014 and settled on March 19, 2014.
In addition to the purchase price, any accrued and unpaid interest on the
purchased notes was paid to the date of purchase. During March 2014,
we recorded early debt redemption costs in connection with the Tender
Oer (see “Early Debt Redemption and Other Costs”).
During June 2014, we issued $3.3 billion aggregate principal amount of
xed and oating rate notes resulting in cash proceeds of approximately
$3.3 billion, net of discounts and issuance costs. The issuances consisted
of the following: $1.3 billion aggregate principal amount of Floating
Rate Notes due 2017 that will bear interest at a rate equal to three-
month LIBOR plus 0.40% which will be reset quarterly and $2.0 billion
aggregate principal amount of 1.35% Notes due 2017. We used the net
proceeds from the oering of these notes to repay the 3-Year Loans on
June 12, 2014.
During July 2014, we amended the term loan agreement, settled the out-
standing $3.3 billion of 5-Year Loans and borrowed $3.3 billion of new
loans. The new loans mature in July 2019, bear interest at a lower interest
rate and require lower amortization payments in 2017 and 2018. In con-
nection with the transaction, which primarily settled on a net basis, we
recorded approximately $0.5 billion of proceeds from long-term borrow-
ings and of repayments of long-term borrowings, respectively.
During January 2015, we entered into a term loan agreement with a
major nancial institution, pursuant to which we can borrow up to $6.5
billion for general corporate purposes, including the acquisition of spec-
trum licenses. Borrowings under the term loan agreement mature in
March 2016, with a partial mandatory prepayment required in June 2015.
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 are equal to or higher than
A3 and A- at Moody’s Investors Service and Standard & Poor’s Ratings
Services, respectively.
May Exchange Oer
On May 29, 2014, we announced the commencement of a private
exchange oer (the May Exchange Oer) to exchange up to all Cellco
Partnership and Verizon Wireless Capital LLC’s £0.6 billion outstanding
aggregate principal amount of 8.875% Notes due 2018 (the 2018 Old
Notes) for Verizon’s new sterling-denominated Notes due 2024 (the New
Notes) and an amount of cash. This exchange oer has been accounted
for as a modication of debt. In connection with the May Exchange Oer,
which expired on June 25, 2014, we issued £0.7 billion aggregate prin-
cipal of New Notes and made a cash payment of £22 million in exchange
for £0.6 billion aggregate principal amount of tendered 2018 Old Notes.
The New Notes bear interest at a rate of 4.073% per annum.
Tender Oer
On March 10, 2014, we announced the commencement of a tender oer (the Tender Oer) to purchase for cash any and all of the series of notes
listed in the following table:
(dollars in millions, except for Purchase Price)
Interest
Rate Maturity
Principal Amount
Outstanding
Purchase
Price (1)
Principal Amount
Purchased
Verizon Communications 6.10% 2018 $ 1,500 $ 1,170.07 $ 748
5.50% 2018 1,500 1,146.91 763
8.75% 2018 1,300 1,288.35 564
5.55% 2016 1,250 1,093.62 652
5.50% 2017 750 1,133.22 353
Cellco Partnership and Verizon Wireless Capital LLC 8.50% 2018 1,000 1,279.63 619
Alltel Corporation 7.00% 2016 300 1,125.26 157
GTE Corporation 6.84% 2018 600 1,196.85 266
$ 4,122
(1) Per $1,000 principal amount of notes