Kraft 2007 Annual Report Download - page 74

Note 4. Debt and Borrowing Arrangements:
Short-term borrowings:
At December 31, 2007 and 2006, our short-term borrowings and related average interest rates consisted of:
2007 2006
Amount
Outstanding
Average
Year-End Rate
Amount
Outstanding
Average
Year-End Rate
(in millions)
Commercial paper $ 1,608 5.0% $ 1,250 5.4%
Danone Biscuit bridge facility 5,527 5.2% - -
Bank loans 250 7.2% 465 6.5%
Total short-term borrowings $ 7,385 $ 1,715
The fair values of our short-term borrowings at December 31, 2007 and 2006, based upon current market interest rates,
approximate the amounts disclosed above.
Borrowing arrangements:
On October 12, 2007, we entered into a 364-day bridge facility agreement for €5.3 billion for our pending acquisition of Danone
Biscuit (“Danone Biscuit Bridge Facility”). Upon closing of the transaction, we borrowed €5.1 billion (approximately $7.5
billion) under this facility to finance the acquisition. We intend to repay our outstanding borrowings under this facility with
proceeds from the issuance of investment grade bonds or other securities. According to the credit agreement, aggregate net cash
proceeds in excess of $1.0 billion from debt offerings having a maturity of greater than one year are required to be repaid. As
such, we repaid approximately €1.3 billion ($2.0 billion) of the bridge facility with the proceeds from our December 2007 debt
issuance. Additionally, proceeds from equity offerings are also required to be repaid under the facility, and drawings under this
facility may be reduced by the aggregate proceeds in excess of $1.0 billion from certain divestitures of assets. This facility
replaced a commitment letter we entered into upon the announcement of the Danone Biscuit acquisition.
On May 24, 2007, we entered into a $1.5 billion, 364-day revolving credit agreement. In accordance with the terms of that
agreement, it terminated upon our issuance of $3.5 billion of senior unsecured notes in August 2007.
We maintain a revolving credit facility that we have historically used for general corporate purposes and to support our
commercial paper issuances. The $4.5 billion, multi-year revolving credit facility expires in April 2010. No amounts were
drawn on this facility at December 31, 2007.
We must maintain a net worth of at least $20.0 billion under the terms of our revolving credit facility. At December 31, 2007,
our net worth was $27.3 billion. We expect to continue to meet this covenant. The revolving credit facility has no other financial
covenants, credit rating triggers or provisions that could require us to post collateral as security.
In addition to the above, some of our international subsidiaries maintain primarily uncommitted credit lines to meet short-term
working capital needs. Collectively, these credit lines amounted to $1.5 billion at December 31, 2007. Borrowings on these lines
amounted to $250 million at December 31, 2007 and $465 million at December 31, 2006, which included $282 million of
outstanding short-term debt related to our United Biscuits acquisition discussed in Note 11, Acquisitions.
Long-term debt:
On August 13, 2007, we issued $3.5 billion of senior unsecured notes, and used the net proceeds ($3,462 million) for general
corporate purposes, including the repayment of outstanding commercial paper. The general terms of the $3.5 billion notes are:
• $250 million total principal notes due August 11, 2010 at a fixed, annual interest rate of 5.625%. Interest is payable
semiannually beginning February 11, 2008.
• $750 million total principal notes due February 11, 2013 at a fixed, annual interest rate of 6.000%. Interest is payable
semiannually beginning February 11, 2008.
• $1.5 billion total principal notes due August 11, 2017 at a fixed, annual interest rate of 6.500%. Interest is payable
semiannually beginning February 11, 2008.
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