ADT 2006 Annual Report Download - page 188

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Debt (Continued)
On January 26, 2006, the Company repaid and terminated one of its synthetic lease facilities used
to finance capital expenditures for manufacturing machinery and equipment for a total cash payment of
$203 million, reducing principal debt and minority interest by $191 million and $10 million, respectively.
On February 21, 2006, TIGSA delivered a notice of redemption to the holders of its Series A
2.75% convertible senior debentures due 2018 with a 2008 put option (the ‘‘2.75% convertible senior
debentures’’), exercising its right to redeem all such debentures at 101.1 percent of the principal
amount outstanding plus accrued interest. The 2.75% convertible senior debentures were convertible
into 43.892 Tyco common shares per $1,000 principal amount. Prior to March 8, 2006, the redemption
date, $1.2 billion of the 2.75% convertible senior debentures were converted into 54.4 million Tyco
common shares and on March 8, 2006, TIGSA redeemed the remaining $1 million principal amount
outstanding with cash.
As of September 29, 2006, TIGSA had $750 million outstanding of its 3.125% convertible senior
debentures due 2023 with a 2015 put option (‘‘the 3.125% convertible senior debentures’’). These
debentures are fully and unconditionally guaranteed by Tyco and, at any time, holders may convert each
$1,000 principal amount of the debentures into 45.9821 Tyco common shares prior to the stated
maturity at a rate of $21.7476 per share. Additionally, holders of the 3.125% convertible senior
debentures may require TIGSA to purchase all or a portion of their debentures on January 15, 2015. If
the option is exercised, TIGSA must repurchase the debentures at par plus accrued interest, and may
elect to repurchase the securities for cash, Tyco common shares, or some combination thereof. TIGSA
may redeem for cash some or all of the 3.125% convertible senior debentures at any time on or after
January 20, 2008, for an amount equal to the redemption price.
The Company’s bank credit agreements contain a number of financial covenants, such as a limit on
the ratio of debt to earnings before interest, income taxes, depreciation, and amortization and
minimum levels of net worth, and limits on the incurrence of liens. At September 29, 2006, the
Company had one remaining synthetic lease facility, with other covenants, including interest coverage
and leverage ratios (see Note 28—Subsequent Events). The Company’s outstanding indentures contain
customary covenants including limits on negative pledges, subsidiary debt and sale/leaseback
transactions. None of these covenants are presently considered restrictive to the Company’s operations.
The Company is currently in compliance with all of its debt covenants.
The fair value of debt was approximately $10.9 billion (book value of $10.2 billion) and
$13.5 billion (book value of $12.5 billion) at September 29, 2006 and September 30, 2005, respectively,
based on discounted cash flow analyses using current market interest rates.
The aggregate amounts of total debt, including capital leases, maturing during the next five years
and thereafter are as follows (in millions): $808 in 2007, $847 in 2008 $2,577 in 2009, $23 in 2010,
$1,009 in 2011 and $4,909 thereafter.
The weighted-average rate of interest on total debt was 5.9% and 5.6% for the years ended
September 29, 2006 and September 30, 2005, respectively, excluding the impact of interest rate swaps.
The weighted-average rate of interest on all variable debt was 6.3% and 7.2% at September 29, 2006
and September 30, 2005, respectively. The impact of the Company’s interest rate swap agreements on
reported interest expense was a net increase of $10 million for 2006 and a net reduction of $40 million
and $66 million for 2005 and 2004, respectively.
126 2006 Financials