AT&T Wireless 2006 Annual Report Download - page 65

2006 AT&T Annual Report : : 63
Included in the table above at December 31, 2005, was
$784 representing the remaining excess of the fair value over
the recorded value of debt in connection with the acquisition
of ATTC, of which $747 was included in our “Unamortized net
premium (discount)” and $37 was included in our “Current
maturities of long-term debt.” The excess is amortized over
the remaining lives of the underlying debt obligations.
At December 31, 2006, the aggregate principal amounts
of long-term debt and the corresponding weighted-average
interest rate scheduled for repayment for the years 2007
through 2011, excluding capitalized leases and the effect of
interest rate swaps, were $4,400 (5.5%), $3,895 (5.5%), $5,919
(4.9%), $2,253 (6.3%) and $7,485 (7.5%) with $27,911 (7.0%)
due thereafter. As of December 31, 2006 and 2005, we were
in compliance with all covenants and conditions of instruments
governing our debt. Substantially all of our outstanding long-
term debt is unsecured.
Financing Activities
Debt During 2006, debt repayments totaled $4,244 and
consisted of:
• $4,040 related to debt repayments with interest rates
ranging from 5.75% to 9.50%, which included $284
associated with unwinding an interest rate foreign currency
swap on our Euro-denominated debt (see Note 8).
• $148 related to called and put debt with interest rates
ranging from 6.35% to 9.5%.
• $56 related to scheduled principal payments on other
debt and repayments of other borrowings.
In May 2006, we received net proceeds of $1,491 from the
issuance of $1,500 of long-term debt consisting of $900 of
two-year floating rate notes and $600 of 6.80%, 30-year
bonds maturing in 2036.
Debt maturing within one year consists of the following at
December 31:
2006 2005
Commercial paper $5,214 $ 320
Current maturities of long-term debt 4,414 4,027
Bank borrowings1 105 108
Total $9,733 $4,455
1
Primarily represents borrowings, the availability of which is contingent on the level of
cash held by some of our foreign subsidiaries.
The weighted-average interest rate on commercial paper debt
at December 31, 2006 and 2005 was 5.31% and 4.31%,
respectively.
In February 2007, we issued $3,200 of long-term debt
consisting of $1,500 principal amount of floating-rate notes due
in 2010, $1,200 principal amount of 6.375% notes due in 2056
and $500 principal amount of 5.625% notes notes due in 2016.
Credit Facility In July 2006, we replaced our three-year
$6,000 credit agreement with a five-year $6,000 credit
agreement with a syndicate of investment and commercial
banks. The current agreement will expire in July 2011. The
available credit under this agreement increased by an addi-
tional $4,000 when we completed our acquisition of BellSouth.
This incremental available credit is intended to replace Bell-
South’s $3,000 credit facility, which was terminated in January
2007. We have the right to request the lenders to further
increase their commitments (i.e., raise the available credit) up
to an additional $2,000, provided no event of default under the
credit agreement has occurred. We also have the right to
terminate, in whole or in part, amounts committed by the
lenders under this agreement in excess of any outstanding
advances; however, any such terminated commitments may
not be reinstated. Advances under this agreement may be
used for general corporate purposes, including support of
commercial paper borrowings and other short-term borrow-
ings. There is no material adverse change provision governing
the drawdown of advances under this credit agreement. This
agreement contains a negative pledge covenant, which
requires that, if at any time we or a subsidiary pledge assets or
otherwise permits a lien on its properties, advances under this
agreement will be ratably secured, subject to specified
exceptions. We must maintain a debt-to-EBITDA (earnings
before interest, income taxes, depreciation and amortization,
and other modifications described in the agreement) financial
ratio covenant of not more than three-to-one as of the last
day of each fiscal quarter for the four quarters then ended. We
are in compliance with all covenants under the agreement. We
had no borrowings outstanding under committed lines of credit
as of December 31, 2006 or 2005.
Defaults under the agreement, which would permit the
lenders to accelerate required payment, include nonpayment
of principal or interest beyond any applicable grace period;
failure by AT&T or any subsidiary to pay when due other debt
above a threshold amount that results in acceleration of that
debt (commonly referred to as “cross-acceleration”) or com-
mencement by a creditor of enforcement proceedings within
a specified period after a money judgment above a threshold
amount has become final; acquisition by any person of
beneficial ownership of more than 50% of AT&T common
shares or a change of more than a majority of AT&T’s directors
in any 24-month period other than as elected by the remain-
ing directors (commonly referred to as a “change-of-control”);
material breaches of representations in the agreement; failure
to comply with the negative pledge or debt-to-EBITDA ratio
covenants described above; failure to comply with other
covenants for a specified period after notice; failure by AT&T or
certain affiliates to make certain minimum funding payments
under ERISA; and specified events of bankruptcy or insolvency.
NOTE 8. FINANCIAL INSTRUMENTS
The carrying amounts and estimated fair values of our long-
term debt, including current maturities, and other financial
instruments, are summarized as follows at December 31:
2006 2005
Carrying Fair Carrying Fair
Amount Value Amount Value
Notes and debentures $54,266 $54,566 $30,027 $30,735
Commercial paper 5,214 5,214 320 320
Bank borrowings 105 105 108 108
AT&T Mobility
shareholder loan — — 4,108 4,108
Available-for-sale
equity securities 2,731 2,731 648 648
EchoStar note receivable 478 467 465 447
Preferred stock
of subsidiaries 43 43 43 43
The fair values of our notes and debentures were estimated
based on quoted market prices, where available, or on the net
present value method of expected future cash flows using