MasterCard 2011 Annual Report Download - page 114

MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Severance Plan
The Company provides limited postemployment benefits to eligible former U.S. employees, primarily
severance under a formal severance plan (the “Severance Plan”). The Company accounts for severance expense
by accruing the expected cost of the severance benefits expected to be provided to former employees after
employment over their relevant service periods. The Company updates the assumptions in determining the
severance accrual by evaluating the actual severance activity and long-term trends underlying the assumptions.
As a result of updating the assumptions, the Company recorded incremental severance expense related to the
Severance Plan of $1 million in 2011 and $3 million in each of the years 2010 and 2009. These amounts were
part of total severance expenses of $23 million, $39 million and $135 million in 2011, 2010 and 2009,
respectively, included in general and administrative expenses in the accompanying consolidated statement of
operations.
Note 13. Debt
On November 22, 2011, the Company extended its committed unsecured revolving credit facility, dated as
of November 22, 2010 (the “Credit Facility”), for an additional year. The new expiration date of the Credit
Facility is November 21, 2014. The available funding under the Credit Facility will remain at $2.75 billion
through November 22, 2013 and then decrease to $2.35 billion during the final year of the Credit Facility
agreement. Other terms and conditions in the Credit Facility remain unchanged. The Company’s option to
request that each lender under the Credit Facility extend its commitment was provided pursuant to the original
terms of the Credit Facility agreement. MasterCard had no borrowings under the Credit Facility at December 31,
2011 and 2010.
The Credit Facility replaced the Company’s prior credit facility which was to expire on April 26, 2011 (the
“Prior Credit Facility”). The available funding under the Prior Credit Facility was $2.5 billion through April 27,
2010 and then decreased to $2 billion for the remaining period of the Prior Credit Facility agreement.
Borrowings under the Credit Facility are available to provide liquidity for general corporate purposes,
including providing liquidity in the event of one or more settlement failures by the Company’s customers. In
addition, for business continuity planning and related purposes, the Company may borrow and repay amounts
under the Credit Facility from time to time. The facility fee and borrowing cost under the Credit Facility are
contingent upon the Company’s credit rating. At December 31, 2011, the applicable facility fee was 20 basis
points on the average daily commitment (whether or not utilized). In addition to the facility fee, interest on
borrowings under the Credit Facility would be charged at the London Interbank Offered Rate (LIBOR) plus an
applicable margin of 130 basis points or an alternate base rate plus 30 basis points.
The Credit Facility contains customary representations, warranties and affirmative and negative covenants,
including a maximum level of consolidated debt to earnings before interest, taxes, depreciation and amortization
(EBITDA) financial covenant and events of default. MasterCard was in compliance with the covenants of the
Credit Facility at December 31, 2011 and 2010. The majority of Credit Facility lenders are customers or affiliates
of customers of MasterCard.
On March 2, 2009, the Company repaid $149 million in short-term debt relating to the Company’s Variable
Interest Entity. See Note 14 (Consolidation of Variable Interest Entity) for more information.
Note 14. Consolidation of Variable Interest Entity
As discussed in Note 8 (Property, Plant and Equipment), the Company executed a lease agreement for
Winghaven, effective March 1, 2009. In conjunction with entering into the lease agreement, the Company
terminated the previous synthetic lease agreement for Winghaven, which included a ten-year term with MCI
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