Black & Decker 2011 Annual Report Download - page 75

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In March 2011, the Company entered into a new four year $1.2 billion committed credit facility (the “Credit Agreement”). In
connection with entering into the Credit Agreement the Company terminated the existing $800.0 million Amended and Restated
Credit Agreement. Additionally, the $700.0 million 364-Day Credit Agreement dated as of March 12, 2010 expired in accordance
with its terms on March 11, 2011. Borrowings under the Credit Agreement may include U.S. Dollars up to the $1.2 billion
commitment or in Euro or Pounds Sterling subject to a foreign currency sublimit of $400.0 million and bear interest at a floating rate
dependent upon the denomination of the borrowing. Repayments must be made on March 11, 2015 or upon an earlier termination date
of the Credit Agreement, at the election of the Company. The Company has not drawn on the commitments provided by the Credit
Agreement. This credit facility is designated to be a liquidity back-stop for the Company’s $2.0 billion commercial paper program. In
addition, the Company has short-term lines of credit that are primarily uncommitted, with numerous banks, aggregating
$403.0 million, of which $366.5 million was available at December 31, 2011. Short-term arrangements are reviewed annually for
renewal. The aggregate long-term and short-term lines amounted to $1.6 billion of which $0.2 million was utilized as outstanding
short-term borrowings at December 31, 2011. The weighted average interest rates on short-term borrowings for the fiscal years ended
December 31, 2011 and January 1, 2011 were 0.3% and 0.4%, respectively.
The Company acquired $1.832 billion of total debt and short-term borrowings in connection with the Merger which included
$157.1 million to increase the debt balance to its estimated fair value. Principal amounts and maturities of the notes acquired in the
Merger were: $400.0 million due in 2011, $300.0 million due in 2014, $350.0 million due in 2014, $300.0 million due in 2016 and
$150.0 million due in 2028. $175.0 million of assumed short-term borrowings were repaid in April 2010 with the proceeds from
additional commercial paper borrowings. The Company executed a full and unconditional guarantee of the existing debt of The
Black & Decker Corporation and Black & Decker Holdings, LLC (this guarantee is applicable to all of the Black & Decker
outstanding notes payable), and Black & Decker executed a full and unconditional guarantee of the existing debt of the Company,
excluding the Company’s Junior Subordinated Debt (redeemed in December 2010), including for payments of principal and interest
and as such these notes rank equally in priority with the Company’s unsecured and unsubordinated debt. Refer to Note U, Parent and
Subsidiary Debt Guarantees, for additional information pertaining to these debt guarantees.
In August 2010, the Company issued $400.0 million of senior unsecured Term Bonds, maturing on September 1, 2040 (“2040 Term
Bonds”) with fixed interest payable semi-annually, in arrears at a rate of 5.20% per annum. The 2040 Term Bonds rank equally with
all of the Company’s existing and future unsecured and unsubordinated debt. The 2040 Term Bonds are guaranteed on a senior
unsecured basis by The Black & Decker Corporation, a subsidiary of the Company. The 2040 Term Bonds are not obligations of or
guaranteed by any of the Company’s other subsidiaries. As a result, the 2040 Term Bonds are structurally subordinated to all debt and
other liabilities of the Company’s subsidiaries other than The Black & Decker Corporation. The Company received net proceeds of
$396.2 million which reflects a discount of $0.4 million to achieve a 5.20% interest rate and paid $3.4 million of fees associated with
the transaction. The Company used the net proceeds from the offering primarily to reduce borrowings under its existing commercial
paper program. The 2040 Term Bonds include a Change of Control provision that would apply should a Change of Control event (as
defined in the Indenture governing the 2040 Term Bonds) occur. The Change of Control provision states that the holders of the Term
Bonds may require the Company to repurchase, in cash, all of the outstanding 2040 Term Bonds for a purchase price at 101.0% of the
original principal amount, plus any accrued and unpaid interest outstanding up to the repurchase date.
In September 2008, the Company issued $250.0 million of unsecured Term Notes maturing October 1, 2013 (the “2013 Term Notes”)
with fixed interest payable semi-annually, in arrears at a rate of 6.15% per annum. The 2013 Term Notes rank equally with all of the
Company’s existing and future unsecured and unsubordinated debt. The Company received net proceeds of $248.0 million which
includes a discount of $0.5 million to achieve a 6.15% interest rate and $1.5 million of fees associated with the transaction. The
Company used the net proceeds from the offering primarily to reduce borrowings under its existing commercial paper program. The
$259.2 million of debt reported at December 31, 2011 reflects the fair value adjustment related to a fixed-to-floating interest rate swap
entered into at the beginning of 2009, as well as the unamortized balance of the $7.9 million gain from a December 2008 swap
termination. This fixed-to-floating interest rate swap was entered into upon issuance of the 2013 Term Notes as detailed in Note I,
Derivative Financial Instruments. The 2013 Term Notes include a Change of Control Triggering Event that would apply should a
Change of Control event (as defined in the Indenture governing the 2013 Term Notes) occur. The Company would be required to
make an offer to repurchase, in cash, all of the outstanding 2013 Term Notes for a purchase price at 101.0% of the original principal
amount, plus any accrued and unpaid interest outstanding up to the purchase date.
In January 2009, the Company entered into a fixed-to-floating interest rate swaps on its $200.0 million notes payable due in 2012 and
$250.0 million notes payable due in 2013. The Company previously had fixed-to-floating rate swaps on these notes that were
terminated in December 2008. The $4.2 million adjustment to the carrying value of the $200.0 million 2012 notes at December 31,
2011 pertains to the unamortized gain on the terminated swap as well as the fair value adjustment of the new swap. At December 31,
2011, the carrying value of the $250.0 million notes payable due 2013 includes $9.4 million pertaining to the unamortized gain on the
terminated swap as well as the fair value adjustment of the new swap offset by $0.2 million unamortized discount on the notes.