MasterCard 2010 Annual Report Download - page 121

MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued
At December 31, 2008, the Company’s consolidated balance sheet included $149 million in short-term debt
relating to the Company’s Variable Interest Entity. See Note 16 (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 16. Consolidation of Variable Interest Entity
As discussed in Note 9 (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 $5 million and
the issuance of 7.36 percent Series A Senior Secured Notes (the “Secured Notes”) with an aggregate principal
amount of $149 million 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 million.
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 $165 million. The “make-whole”
amount of $5 million 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 million 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 and 2008,
its operations had no impact on net income. However, interest income and interest expense were increased by $7
million and $11 million in 2009 and 2008, respectively. The Company did not provide any financial or other
support that it was not contractually required to provide during the years ended December 31, 2009 or 2008.
The Company has additional investments in VIEs for which the Company is not the primary
beneficiary. These investments are not consolidated and are accounted for under the equity method of accounting
and recorded in other assets on the consolidated balance sheet.
111