Kraft 2009 Annual Report Download - page 79

the signing of the new agreement. We intend to use the revolving credit facility for general corporate purposes, including for working capital
purposes, and to support our commercial paper issuances. No amounts have been drawn on the facility.
The revolving credit agreement requires us to maintain a minimum total shareholders’ equity, excluding accumulated other comprehensive
earnings / (losses), of at least $23.0 billion. Upon the completion of our acquisition of Cadbury, this covenant will increase by 75% of any increase
in our total shareholders’ equity as a direct result of a) our issuance of certain types of equity securities to finance the acquisition; or b) our
refinancing certain indebtedness. At December 31, 2009, our total shareholders’ equity, excluding accumulated other comprehensive earnings /
(losses), was $29.8 billion. We expect to continue to meet this covenant. The revolving credit agreement also contains customary representations,
covenants and events of default. However, 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, 2009. Borrowings on these lines amounted to $191 million at
December 31, 2009 and $291 million at December 31, 2008.
On November 9, 2009, we entered into an agreement for a £5.5 billion (approximately $8.9 billion) 364-day senior unsecured bridge facility (the
“Cadbury Bridge Facility”). On January 18, 2010, we amended the agreement to increase the Cadbury Bridge Facility to an aggregate of
£7.1 billion. On February 11, 2010, after the issuance of $9.5 billion of senior unsecured notes, we amended the agreement again to decrease the
Cadbury Bridge Facility to an aggregate of £1.3 billion. We expect to use borrowings under the Cadbury Bridge Facility and proceeds from other
financing sources to finance the Cadbury acquisition and to refinance certain indebtedness of Cadbury and its subsidiaries. With certain
restrictions, borrowings under the Cadbury Bridge Facility are also available for our general corporate purposes.
The Cadbury Bridge Facility agreement includes the same minimum shareholders’ equity requirement as in our $4.5 billion revolving credit
agreement. In addition, in the event that our long-term senior unsecured indebtedness is rated below investment grade by either Moody’s or
Standard & Poor’s, the Cadbury Bridge Facility agreement requires us to maintain a net debt to adjusted EBITDA ratio of not more than 4.25 to
1.00. At December 31, 2009, we continued to maintain our investment grade debt rating, and our net debt to adjusted EBITDA ratio was 2.64. The
Cadbury Bridge Facility agreement also contains customary representations, covenants and events of default and requires the prepayment of
advances and / or the permanent reduction of commitments under the facility with the net cash proceeds received from certain disposals, debt
issuances and equity capital markets transactions. No amounts were drawn on the facility at December 31, 2009.
Subject to market conditions, we expect to refinance or reduce advances under the Cadbury Bridge Facility from proceeds of alternative financing
sources.
Long-Term Debt:
On February 8, 2010, we issued $9.5 billion of senior unsecured notes at a weighted-average effective rate of 5.364% and are using the net
proceeds ($9,379 million) to finance the Cadbury acquisition and for general corporate purposes. The general terms of the $9.5 billion notes are:
• $3.75 billion total principal notes due February 10, 2020 at a fixed, annual interest rate of 5.375%. Interest is payable semiannually
beginning August 10, 2010.
• $3.00 billion total principal notes due February 9, 2040 at a fixed, annual interest rate of 6.500%. Interest is payable semiannually
beginning August 9, 2010.
• $1.75 billion total principal notes due February 9, 2016 at a fixed, annual interest rate of 4.125%. Interest is payable semiannually
beginning August 9, 2010.
• $1.00 billion total principal notes due May 8, 2013 at a fixed, annual interest rate of 2.625%. Interest is payable semiannually beginning
November 8, 2010.
On December 19, 2008, we issued $500 million of senior unsecured notes and used the net proceeds ($498 million) for general corporate
purposes, including the repayment of outstanding commercial paper. The general terms of the $500 million notes are: $500 million total principal
notes due February 19, 2014 at a fixed, annual interest rate of 6.750%. Interest is payable semiannually, and began on February 19, 2009.
76
Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Research℠