Pitney Bowes 2009 Annual Report Download - page 74

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)
56
8. Long-term Debt
December 31,
2009 2008
Recourse debt
0.64% to 1.88% credit facility due 2012 $ 150,000 $ 150,000
2.72% to 4.63% notes due 2012 400,000 400,000
3.88% notes due 2013 375,000 375,000
4.88% notes due 2014 450,000 450,000
5.00% notes due 2015 400,000 400,000
4.75% notes due 2016 500,000 500,000
5.75% notes due 2017 500,000 500,000
4.75% notes due 2018 (1) 350,000 350,000
1.79% to 3.02% notes due 2018 250,000 250,000
6.25% notes due 2019 300,000 -
5.25% notes due 2037 500,000 500,000
Fair value hedges basis adjustment (2) 52,788 76,043
Other (3) (14,148) (16,178)
Total long-term debt $ 4,213,640 $ 3,934,865
(1) In April 2003, we entered into an interest rate swap for an aggregate notional amount of $350 million. The interest rate swap
effectively converted the fixed rate of 4.75% on $350 million of our notes, due 2018, into variable interest rates. The variable
rates payable by us in connection with the swap agreement were based on six month LIBOR less a spread of 22.8 basis points and
the fixed rate received by us matched the fixed interest payment due on the notes. On November 21, 2008, we unwound this
interest rate swap. This transaction was not undertaken for liquidity purposes but rather to fix our effective interest rate to 3.2%
for the remaining term of these notes. We received $44 million, excluding accrued interest, associated with the unwind of this
interest rate swap. This amount will be reflected as a reduction of interest expense over the remaining term of these notes.
(2) The fair value hedges basis adjustment represents the revaluation of fixed rate debt that has been hedged in accordance with the
derivatives and hedging accounting guidance.
(3) Other consists primarily of debt discounts and premiums.
On September 15, 2009, we repaid the 8.55% notes with a $150 million face value at their maturity. The repayment of these notes
was funded through cash generated from operations and issuance of commercial paper. The notes were reported in current portion of
long-term debt at December 31, 2008.
On June 29, 2009, we entered into an interest rate swap for an aggregate notional amount of $100 million to effectively convert our
interest payments on a portion of the $400 million, 4.625% fixed rate notes due in 2012, into variable interest rates. The variable rates
payable are based on one month LIBOR plus 249 basis points. In July 2009, we entered into three additional interest rate swaps for an
aggregate notional amount of $300 million to effectively convert our interest payments on the remainder of the $400 million, 4.625%
fixed rate notes due in 2012, into variable interest rates. The variable rates payable are based on one month LIBOR plus 248 basis
points for $100 million notional amount and one month LIBOR plus 250 basis points for $200 million notional amount.
On March 2, 2009, we issued $300 million of 10-year fixed-rate notes with a coupon rate of 6.25%. The interest is paid semi-annually
beginning September 15, 2009. The notes mature on March 15, 2019. We simultaneously unwound four forward starting swap
agreements (forward swaps) used to hedge the interest rate risk associated with the forecasted issuance of the fixed-rate debt. The
unwind of the derivatives resulted in a loss (and cash payment) of $20.3 million which was recorded to other comprehensive income,
net of tax, and will be amortized to net interest expense over the 10-year term of the notes. The proceeds from these notes were used
for general corporate purposes, including the repayment of commercial paper.