AT&T Wireless 2012 Annual Report Download - page 52

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Dollars in millions except per share amounts
50 | AT&T Inc.
• at a rate equal to: (i) the LIBOR for a period of one,
two, three or six months, as applicable, plus (ii) the
Applicable Margin.
The Applicable Margin for both agreements will equal 0.565%
per annum if our unsecured long-term debt is rated at least
A+ by Standard & Poor’s (S&P) or Fitch, Inc. (Fitch) or A1 by
Moody’s Investors Service (Moody’s). The Applicable Margin
will be 0.680% per annum if our unsecured long-term debt
ratings are A or A2 and will be 0.910% per annum in the
event our unsecured long-term debt ratings are A- and A3
(or below). In the event that AT&T’s unsecured long-term
debt ratings are split by S&P, Moody’s and Fitch, then the
Applicable Margin will be determined by the highest of the
three ratings, except that in the event the lowest of such
ratings is more than one level below the highest of the
ratings then the Applicable Margin will be determined based
on the level that is one level above the lowest of such ratings.
Under each agreement AT&T will pay a facility fee of 0.060%,
0.070% or 0.090% per annum, depending on AT&T’s credit
rating, of the amount of lender commitments.
Both agreements contain a negative pledge covenant, which
requires that, if at any time AT&T or a subsidiary pledges
assets or otherwise permits a lien on its properties, advances
under the agreement will be ratably secured, subject to
specified exceptions. Both agreements also contain a
financial ratio covenant that provides that AT&T will maintain,
as of the last day of each fiscal quarter, a debt-to-EBITDA
(earnings before interest, income taxes, depreciation and
amortization, and other modifications described in the
agreements) ratio of not more than 3.0 to 1, for the four
quarters then ended.
Defaults under both agreements, which would permit the
lenders to accelerate required repayment and which would
increase the Applicable Margin by 2.00% per annum, include:
• We fail to pay principal or interest, or other amounts
under the agreement beyond any grace period.
• We fail to pay when due other debt of $400 or more
that results in acceleration of that debt (commonly
referred to as cross-acceleration) or a creditor
commences enforcement proceedings within a specified
period after a money judgment of $400 or more has
become final.
• A person acquires beneficial ownership of more than
50% of AT&T common shares or more than a majority of
AT&T’s directors change in any 24-month period other
than as elected by the remaining directors (commonly
referred to as a change in control).
• Material breaches of representations or warranties in the
agreement.
• We fail to comply with the negative pledge or debt-to-
EBITDA ratio covenants under the agreement.
In December 2010, our Board of Directors authorized the
repurchase of up to 300 million shares of AT&T common
stock. We began buying back stock under this program in
the first quarter of 2012. In July 2012, the Board of Directors
authorized the repurchase of an additional 300 million
shares. As of December 31, 2012, we have repurchased
371 million shares totaling $12,752. During the fourth-
quarter 2012, we completed the repurchase of shares
authorized by the Board of Directors in December 2010
and continued to repurchase shares under the July 2012
authorization. We expect to continue repurchasing our
common stock and plan to complete repurchases under
the July 2012 authorization as early as mid-year.
We plan to fund our 2013 financing activities through a
combination of cash from operations and debt issuances.
The timing and mix of debt issuance will be guided by credit
market conditions and interest rate trends. The emphasis
of our financing activities will be the payment of dividends,
subject to approval by our Board of Directors, the repayment
of debt and share repurchases.
Credit Facilities
On December 11, 2012, we amended and extended for an
additional one-year term our existing $5,000, four-year
revolving credit agreement (Four-Year Agreement) with a
syndicate of banks until December 2016. We also entered
into a new $3,000, five-year revolving credit agreement
(Five-Year Agreement), with a syndicate of banks, to replace
our expiring 364-day revolving credit agreement. In the event
advances are made under either agreement, those advances
would be used for general corporate purposes. Advances are
not conditioned on the absence of a material adverse
change. All advances must be repaid no later than the date
on which lenders are no longer obligated to make any
advances under each agreement. Under each agreement,
we can terminate, in whole or in part, amounts committed by
the lenders in excess of any outstanding advances; however,
we cannot reinstate any such terminated commitments.
At December 31, 2012, we had no advances outstanding
under either agreement and were in compliance with all
covenants under each agreement.
Advances under both agreements would bear interest, at
AT&T’s option, either:
• at a variable annual rate equal to (1) the highest of: (a)
the base (or prime) rate of the bank affiliate of Citibank,
N.A. which is serving as administrative agent under the
Agreement, (b) 0.50% per annum above the Federal
funds rate, and (c) the LIBOR applicable to U.S. dollars
for a period of one month plus 1.00% per annum, plus
(2) an applicable margin, as set forth in the Agreement
(Applicable Margin); or