MasterCard 2009 Annual Report Download - page 116

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MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except percent and per share data)
At December 31, 2008, the Company’s consolidated balance sheet included $149,380 in short-term debt
relating to the Company’s Variable Interest Entity. See Note 15 (Consolidation of Variable Interest Entity) for
more information. On March 2, 2009, the Company repaid this short-term debt.
On January 5, 2009, HSBC Bank plc (“HSBC”) notified the Company that, effective December 31, 2008, it
had terminated an uncommitted credit agreement totaling 100 million euros between HSBC and MasterCard
Europe. There were no borrowings under this agreement at December 31, 2008.
Note 15. Consolidation of Variable Interest Entity
As discussed in Note 8 (Property, Plant and Equipment), the Company executed a new lease agreement for
Winghaven, effective March 1, 2009. In conjunction with entering into the new lease agreement, the Company
terminated the original synthetic lease agreement for Winghaven, which included a ten-year term with MCI
O’Fallon 1999 Trust (the “Trust”) as the lessor. The Trust, which was a variable interest entity, was established
for a single discrete purpose, was not an operating entity, had a limited life and had no employees. The Trust had
financed Winghaven through a combination of a third party equity investment in the amount of $4,620 and the
issuance of 7.36 percent Series A Senior Secured Notes (the “Secured Notes”) with an aggregate principal
amount of $149,380 and a maturity date of September 1, 2009. MasterCard International executed a guarantee of
85.15 percent of the aggregate principal amount of the Secured Notes outstanding, for a total of $127,197.
Additionally, upon the occurrence of specific events of default, MasterCard International guaranteed the
repayment of the total outstanding principal and interest on the Secured Notes and agreed to take ownership of
the facility. During 2004, MasterCard Incorporated became party to the guarantee and assumed certain covenant
compliance obligations, including financial reporting and maintenance of a certain level of consolidated net
worth. As the primary beneficiary of the Trust, the Company had consolidated the assets and liabilities of the
Trust in its consolidated financial statements.
Effective March 1, 2009, the aggregate outstanding principal and accrued interest on the Secured Notes was
repaid, the investor equity was redeemed, and the guarantee obligations of MasterCard International and
MasterCard Incorporated were terminated. The aggregate principal amount and interest plus a “make-whole”
amount repaid to the holders of Secured Notes and the equity investor was $164,572. The “make-whole” amount
of $4,874 included in the repayment represented the discounted value of the remaining principal and interest on
the Secured Notes, less the outstanding principal balance and an equity investor premium. Also as a result of the
transaction, $154,000 of short-term municipal bonds classified as held-to-maturity investments were cancelled.
The Trust is no longer considered a variable interest entity and is no longer consolidated by the Company.
During the period when the Trust was a consolidated entity within the years ended December 31, 2009, 2008 and
2007, its operations had no impact on net income. However, interest income and interest expense were increased
by $6,773, $11,390 and $11,390 in 2009, 2008 and 2007, respectively. The Company did not provide any
financial or other support that it was not contractually required to provide during each of the years ended
December 31, 2009, 2008 and 2007.
Note 16. Stockholders’ Equity
Initial Public Offering (“IPO”)
On May 31, 2006, MasterCard transitioned to a new ownership and governance structure upon the closing
of its IPO and issuance of a new class of the Company’s common stock. Prior to the IPO, the Company’s capital
stock was privately held by certain of its customers that were principal members of MasterCard International. All
stockholders held shares of Class A redeemable common stock.
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