Avon 2009 Annual Report Download - page 76

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In June 2003, we issued to the public $250.0 principal amount of
registered senior notes (the “4.20% Notes”). The 4.20% Notes
mature on July 15, 2018, and bear interest at aper annum rate of
4.20%, payable semi-annually. The carrying value of the4.20% Notes
represents the $250.0 principal amount, net of the unamortized
discount to face value of $.7 and $.8 at December 31, 2009 and
2008, respectively.
In April 2003, the call holder of $100.0 principal amount of
6.25% Notes due May 2018 (the “Notes”), embedded with put
and call option features, exercised the call option associated with
these Notes, and thus became the sole note holder of the Notes.
Pursuant to an agreement with the sole note holder, we modified
these Notes into $125.0 aggregate principal amount of 4.625%
notes due May 15, 2013. The modified principal amount repre-
sented the original value of the putable/callable notes, plus the
market value of the related call option and approximately $4.0
principal amount of additional notes issued for cash. In May 2003,
$125.0 principal amount of registered senior notes were issued in
exchange for the modified notes held by the sole note holder. No
cash proceeds were received by us. The registered senior notes
mature on May 15, 2013, and bear interest at aper annum rate of
4.625%, payable semi-annually (the “4.625% Notes”). The trans-
action was accounted for as an exchange of debt instruments and,
accordingly, the premium related to the original notes is being
amortized over the life of the new 4.625% Notes. The carrying
value of the4.625% Notes represents the$125.0 principal amount,
net of the unamortized discount to face value and the premium
related to thecall option associated with the original notes totaling
$8.7 at December 31, 2009, and $10.9 at December 31, 2008.
Annual maturities of long-term debt (including unamortized
discounts and premiums and excluding the adjustments for debt
with fair value hedges) outstanding at December 31, 2009, are
as follows:
2010 2011 2012 2013 2014
After
2014 Total
Maturities $15.3 $511.6 $12.2 $380.5 $505.6 $887.2 $2,312.4
Other Financing
We have afive-year, $1,000.0 revolving credit and competitive
advance facility (the “credit facility”), which expires in January 2011.
The credit facility maybeused for general corporate purposes. The
interest rate on borrowings under thecredit facility is based on
LIBOR or on thehigher of prime or 1/2% plus the federal funds rate.
The credit facility has an annual feeof$.7, payable quarterly, based
on our current credit ratings.The credit facility contains various
covenants, including afinancial covenant which requires our interest
coverage ratio (determined in relation to our consolidated pretax
income and interest expense) to equal or exceed4:1. There were no
amounts outstanding under thecredit facility at December 31, 2009
and December 31, 2008, respectively.
We maintain a$1,000.0 commercial paper program. Under the
program, we may issue from time to time unsecured promissory
notes in the commercial paper market in private placements
exempt from registration under federal and state securities laws,
for acumulative face amount not to exceed $1,000.0 outstanding
at any one time and with maturities not exceeding 270 days from
the date of issue. The commercial paper short-term notes issued
under the program are not redeemable prior to maturity and are
not subject to voluntary prepayment. The commercial paper pro-
gram is supported by our credit facility. Outstanding commercial
paper effectively reduces the amount available for borrowing
under the credit facility. At December 31, 2009, we had no
amounts outstanding under the commercial paper program. At
December 31, 2008, we had commercial paper outstanding of
$499.7 at an average annual interest rate of 2.3%.
The indentures under which the above notes were issued contain
certain covenants, including limits on the incurrence of liens and
restrictions on the incurrence of sale/leaseback transactions and
transactions involving amerger, consolidation or sale of substan-
tially all of our assets. At December 31, 2009, we were in compliance
with all covenants in our indentures. Such indentures do not
contain any rating downgradetriggers that would accelerate the
maturity of our debt. However, we would be required to make an
offer to repurchase the 2013 Notes, 2014 Notes, 2018 Notes, and
2019 Notes at aprice equal to 101% of their aggregate principal
amount plus accrued and unpaid interest in the event of achange
in control involving Avon and acorresponding ratings downgrade
to below investment grade.
At December 31, 2009, we also had letters of credit outstanding
totaling $39.7, which primarily guarantee various insurance
activities. In addition, we had outstanding letters of credit for
various trade activities and commercial commitments executed in
the ordinary course of business, such as purchase orders for
normal replenishment of inventory levels.