ADT 2009 Annual Report Download - page 149

Debt Tenders
In connection with the settlement of litigation arising from the Separation related to our public
debt, on June 3, 2008 we, along with our finance subsidiary TIFSA, a wholly-owned subsidiary of the
Company and successor company to Tyco International Group S.A. (‘‘TIGSA’’), a wholly-owned
subsidiary of the Company organized under the laws of Luxembourg, consummated consent
solicitations and exchange offers related to certain series of debt issued under our 1998 and 2003
indentures. In connection with the exchange offers, we issued $422 million principal amount of 7.0%
notes due 2019 in exchange for an equal principal amount of 7.0% notes due 2028 and $707 million
principal amount of 6.875% notes due 2021 in exchange for an equal principal amount of 6.875% notes
due 2029. In connection with the consent solicitations, holders of our 6.0% notes due 2013, 6.125%
notes due 2008, 6.125% notes due 2009, 6.75% notes due 2011, 6.375% notes due 2011, 7.0% notes
due 2028 and 6.875% notes due 2029 collectively received consent payments totaling $250 million.
The terms of the consent and exchange offers were evaluated as a debt modification in accordance
with the authoritative guidance for 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, we 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.
During the year ended September 26, 2008, in connection with the consent solicitations and
exchange offers, we recorded a $222 million charge to other expense, net as a loss on extinguishment of
debt. This charge was 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.
During the year ended September 28, 2007, we 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 our credit
rating and facility utilization. Together with our $1.19 billion five-year senior revolving credit
agreement, dated as of April 25, 2007, our total committed revolving credit line was $1.69 billion as of
September 25, 2009. These revolving credit facilities may be used for working capital, capital
expenditures and other corporate purposes. As of September 25, 2009, there were no amounts drawn
under these facilities, although we had dedicated $200 million of availability to backstop outstanding
commercial paper. As discussed above, we believe that all of the lenders under our revolving credit
facility are capable of meeting any borrowing requests TIFSA may make.
TIFSA’s bank credit agreements contain customary terms and conditions, and financial covenants
that limit the ratio of our debt to earnings before interest, taxes, depreciation, and amortization and
that limit our ability to incur subsidiary debt or grant liens on our property. Our indentures contain
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