ADT 2007 Annual Report Download - page 221

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Debt (Continued)
and sale/leaseback transactions. None of these covenants are considered restrictive to the Company’s
business. The Company believes it is in compliance with all of its debt covenants. The Bank of New
York, as indenture trustee under indentures dated as of June 9, 1998 and November 12, 2003, is
contesting whether the Separation transactions were permitted under such indentures. See Note 16.
Convertible Debentures
As of September 28, 2007, TIFSA had $21 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. These debentures were originally
convertible into Tyco shares. As a result of the Separation and the distribution of Covidien and Tyco
Electronics shares to Tyco’s shareholders, these debentures are now convertible into Tyco, Covidien and
Tyco Electronics shares. At any time subsequent to the Separation, holders may convert each $1,000
principal amount of the debentures into 11.496 Tyco common shares, 11.496 Covidien common shares
and 11.496 Tyco Electronics common shares prior to the stated maturity. Additionally, holders of the
3.125% convertible senior debentures may require TIFSA to purchase all or a portion of their
debentures on January 15, 2015. If the option is exercised, TIFSA must repurchase the debentures at
par plus accrued interest, and may elect to repurchase the securities for cash, common shares, or some
combination thereof. TIFSA 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.
Other Debt Information
The fair value of debt was approximately $4.5 billion (book value of $4.5 billion) and $10.4 billion
(book value of $9.6 billion) at September 28, 2007 and September 29, 2006, respectively, based on
discounted cash flow analyses using current market interest rates.
The aggregate amounts of principal debt, including capital leases, maturing during the next five
years and thereafter are as follows (in millions): $380 in 2008, $524 in 2009, $7 in 2010, $521 in 2011,
$1,160 in 2012 and $1,885 thereafter.
The weighted-average interest rate on total debt was 6.3% and 6.0% at September 28, 2007 and
September 29, 2006, respectively, excluding the impact of interest rate swaps. The weighted-average
interest rate on short-term debt was 5.5% at September 28, 2007. 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
decrease of $40 million for 2005, respectively. Of these amounts, $6 million of the increase in 2006 and
$24 million of the decrease in 2005 for interest expense was allocated and included in discontinued
operations.
14. Guarantees
Certain of the Company’s business segments have guaranteed the performance of third-parties and
provided financial guarantees for uncompleted work and financial commitments. The terms of these
guarantees vary with end dates ranging from 2008 through the completion of such transactions. The
guarantees would be triggered in the event of nonperformance and the potential exposure for
nonperformance under the guarantees would not have a material effect on the Company’s financial
position, results of operations or cash flows.
2007 Financials 129