ADT 2008 Annual Report Download - page 237

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Debt (Continued)
The terms of the consent and exchange offers were evaluated as a debt modification in accordance
with EITF No. 96-19, ‘‘Debtor’s Accounting for a Modification or Exchange of Debt Instruments,’’ and
it was determined that the 7.0% notes due 2028 and the 6.875% notes due 2029 were extinguished
because the cash flows of the new bonds as compared to the original bonds were substantially modified.
As a result, the new bonds and the 7.0% notes due 2028 and the 6.875% notes due 2029 that were not
tendered for exchange were recorded at their fair value upon completion of the exchange offers. In
determining fair value, the Company measured the bonds as if they were an initial issuance to the
public. This was done by obtaining effective yield data derived from comparable pricing received from
the issuance of bonds with similar ratings and covenants by large public companies.
In connection with the consent solicitations and exchange offers, the Company recorded a
$222 million charge to other expense, net as a loss on extinguishment of debt. This charge is comprised
of the consent payments related to the extinguished bonds (notes due 2028 and 2029), premium on the
exchanged bonds which represents the difference between the fair value and the book value of the
extinguished bonds, and the write-off of the original unamortized debt issuance costs, as well as fees
paid to third parties associated with the bonds that were not deemed extinguished. The remaining
portion of the consent payment and issuance costs will be amortized over the remaining life of the
bonds.
In May 2008, TIFSA commenced issuing commercial paper to U.S. institutional accredited investors
and qualified institutional buyers. Borrowings under the commercial paper program are available for
general corporate purposes. As of September 26, 2008, TIFSA had $116 million of commercial paper
outstanding, which bore interest at an average rate of 2.95%.
During the year ended September 28, 2007, the Company recorded a $259 million charge to other
expense, net for the loss on early extinguishment of debt related to the debt tender offers in connection
with the Separation.
Bank and Revolving Credit Facilities
On June 24, 2008, Tyco and TIFSA entered into a $500 million senior unsecured revolving credit
agreement with Citibank, N.A., as administrative agent for the lenders party thereto. This credit
agreement has a three-year term. Borrowings under this agreement have a variable interest rate based
on LIBOR or an alternate base rate. The margin over LIBOR can vary based on changes in the
Company’s credit rating and facility utilization. Together with the existing $1.25 billion five-year senior
revolving credit agreement, dated as of April 25, 2007, the Company’s total commitments under these
facilities increased to $1.75 billion. These revolving credit facilities will be used for working capital,
capital expenditures and other corporate purposes. As of September 26, 2008, there was $286 million
drawn under these unsecured revolving credit facilities.
On September 15, 2008, Lehman Brothers Holdings Inc. (‘‘Lehman’’) filed a petition under
Chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court for the Southern District of
New York. Lehman is one of the lenders in the Company’s $1.25 billion revolving credit facility with a
commitment of $60 million. The Company’s $500 million credit facility did not have a commitment
from Lehman.
On September 25, 2008, the Company issued a borrowing request for $300 million under our
$1.25 billion credit facility in accordance with the terms of the agreement. The Lehman portion of the
134 2008 Financials