Occidental Petroleum 2008 Annual Report Download - page 64

In October 2008, Occidental issued $1 billion of 7-percent senior notes receiving $985 million of net proceeds. Interest on the notes
will be payable semi-annually in arrears on May 1 and November 1 of each year, beginning on May 1, 2009. The notes will mature on
November 1, 2013.
In September 2006, Occidental amended and restated its $1.5 billion bank credit (Credit Facility) to, among other things, lower the
interest rate and extend the term to September 2011. In September 2007, participating lenders extended the maturity date on $1.4 billion of
aggregate loan commitments under the Credit Facility to September 2012. The Credit Facility provides for the termination of the loan
commitments and requires immediate repayment of any outstanding amounts if certain events of default occur or if Occidental files for
bankruptcy. Occidental did not draw down any amounts under the Credit Facility during 2008. Available but unused lines of committed bank
credit totaled approximately $1.5 billion at December 31, 2008.
None of Occidental's committed bank credits contain material adverse change (MAC) clauses or debt rating triggers that could restrict
Occidental's ability to borrow under these lines. Occidental's credit facilities and debt agreements do not contain rating triggers that could
terminate bank commitments or accelerate debt in the event of a ratings downgrade. Up to $350 million of the Credit Facility is available in
the form of letters of credit. Borrowings under the Credit Facility bear interest at various benchmark rates, including LIBOR, plus a margin
based on Occidental's senior debt ratings. Additionally, Occidental paid an annual facility fee of 0.05 percent to 0.06 percent in 2008 on the
total commitment amount, which was based on Occidental's senior debt ratings.
In May 2007, Occidental redeemed all $276 million of the outstanding principal amount of its 8.25-percent Vintage senior notes due
2012. In January 2007, Occidental completed cash tender offers for portions of various debt instruments totaling $659 million in principal
amount. The redemption and repurchases resulted in a pre-tax interest expense of $167 million.
In 2006, Occidental recorded $35 million of pre-tax charges to redeem all of its outstanding 7.375-percent senior notes due 2008 and
all of its 7.875-percent Vintage senior subordinated notes due 2011 and to purchase in the open market and retire various amounts of
Occidental and Vintage senior notes and unsecured subsidiary notes.
At December 31, 2008, minimum principal payments on long-term debt subsequent to December 31, 2008, aggregated $2,749
million, of which $691 million is due in 2009, $239 million in 2010, $68 million in 2011, $368 million in 2012, $1,000 million in 2013,
zero in 2014 and $383 million thereafter.
As of December 31, 2008, under the most restrictive covenants of certain financing agreements, Occidental's capacity for additional
unsecured borrowing was approximately $65.3 billion and the capacity for the payment of cash dividends and other distributions on, and for
acquisitions of, Occidental’s capital stock was approximately $25.1 billion, assuming that such dividends, distributions and acquisitions were
made without incurring additional borrowings.
Occidental estimates the fair value of its long-term debt based on the quoted market prices for the same or similar issues or on the
yields offered to Occidental for debt of similar rating and similar remaining maturities. The estimated fair values of Occidental’s debt, at
December 31, 2008 and 2007, were approximately $2.9 billion and $1.9 billion, respectively, compared with carrying values of
approximately $2.7 billion and $1.8 billion, respectively.
NOTE 6 LEASE COMMITMENTS
The present value of minimum capital lease payments, net of the current portion, totaled $25 million at both December 31, 2008 and
2007. These amounts are included in other liabilities.
Operating and capital lease agreements, which include leases for manufacturing facilities, office space, railcars and tanks, frequently
include renewal or purchase options and require Occidental to pay for utilities, taxes, insurance and maintenance expense.
At December 31, 2008, future net minimum lease payments for capital and noncancelable operating leases (excluding oil and gas
and other mineral leases, utilities, taxes, insurance and maintenance expense) were the following:
In millions Capital Operating (a)
2009 $1 $154
2010 1 122
2011 1 99
2012 1 74
2013 1 60
Thereafter 27 670
Total minimum lease payments 32 $1,179
Less:
Imputed interest 7
Present value of minimum capital lease payments, net of current portion $25
(a) At December 31, 2008, these operating lease payments are net of sublease rental amounts of $44 million, which are to be received as follows (in millions): 2009
—$10, 2010—$8, 2011—$8, 2012—$8, 2013—$7 and thereafter—$3.
50
Rental expense for operating leases, net of sublease rental income, was $178 million in 2008, $196 million in 2007 and $199